Hospitality Investors Trust pre-packaged plan effective as of June 30

By Sarah Lizee

Olympia, Wash., July 1 – Hospitality Investors Trust, Inc.’s pre-packaged Chapter 11 plan of reorganization went into effect on Wednesday, according to an 8-K filed with the Securities and Exchange Commission.

As previously reported, the U.S. Bankruptcy Court for the District of Delaware confirmed the plan on June 23.

The debtors negotiated the terms of a restructuring support agreement in the months leading up to their petition date.

The restructuring will provide for the cancellation of the debtors’ existing preferred equity interests and the issuance of 100% of new common equity interests in the reorganized REIT to the plan sponsor, Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC. Brookfield holds all of the interests in the existing preferred equity interests, which is the fulcrum security in the debtors’ capital structure.

The restructuring also provided for up to $65 million in debtor-in-possession financing to fund working capital needs and anticipated transaction fees and expenses. Trimont Real Estate Advisors, LLC is the administrative and collateral agent.

On the effective date, the REIT will also get a $60 million exit revolving credit facility. Brookfield is the administrative and collateral agent. Interest is 15% and the revolver will mature in 2024.

On the effective date, holders of secured claims will receive either payment in full in cash or the collateral securing their claims.

Holders of unsecured priority claims will receive payment in full in cash.

Holders of general unsecured claims will have their claims reinstated and paid in full, or have their claims otherwise rendered unimpaired.

Intercompany claims will be reinstated.

The existing preferred interests will be extinguished in exchange for each holder’s pro rata share, together with the holders of DIP claims and existing Hospitality Investors Trust Operating Partnership, LP preferred interests, of 100% of the new common equity interests issued on the effective date.

On the effective date, 98% of the existing Hospitality Investors Trust Operating Partnership preferred interests will be extinguished in exchange for each holder’s pro rata share, together with the holders of DIP claims and existing Hospitality Investors Trust preferred interests, of 100% of the new common equity interests issued on the effective date, and 2% of the existing Hospitality Investors Trust Operating Partnership preferred interests in the debtors will be canceled in exchange for each holder’s pro rata share of 2% of new Hospitality Investors Trust Operating Partnership interests.

All existing common equity interests will be canceled, extinguished and discharged in exchange for each holder receiving one contingent value right in respect of each share of the existing common equity interests outstanding immediately prior to the effective date.

The plan aims to leave unimpaired and provide for payment in the ordinary course all of the company’s employees, vendors, lenders, franchisors and hotel management companies.

The New York-based hotel real estate investment trust filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on May 19 under case number 21-10831.

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