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Hotel REIT Preps Deal to Give Brookfield Control in Bankruptcy

Debt-burdened Hospitality Investors Trust Inc., which owns about 100 hotels, is in talks for a takeover by Brookfield Asset Management.

(Bloomberg) --Hospitality Investors Trust Inc. is nearing a deal that would hand control of the debt-laden hotel operator to Brookfield Asset Management as part of a pre-packaged bankruptcy, according to people with knowledge of the matter.

HIT, which owns about 100 hotels across the U.S., has been getting advice from law firm Proskauer Rose and investment bank Jefferies Financial Group Inc. on the restructuring talks, said the people, who asked not to be identified discussing confidential discussions. The real estate investment trust said in a regulatory filing last week that it was negotiating with Brookfield, its largest investor, over a potential Chapter 11 filing.

Representatives for Hospitality Investors Trust and Proskauer didn’t respond to a request for comment, while representatives for Brookfield and Jefferies declined to comment.

Hospitality Investors Trust is the latest U.S. hotel operator to consider bankruptcy after the Covid-19 pandemic spurred a slowdown in global travel. REIT Eagle Hospitality Trust filed for Chapter 11 earlier this year, as have several individual hotels across the country.

The REIT owns older hotels with Marriott International Inc., Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp. branding. Its top markets by room are Orlando, Florida, Atlanta, and West Palm Beach/Boca Raton, Florida, according to its website and annual report.

Hospitality Investors Trust no longer has sufficient cash fund its obligations and Brookfield is the only likely provider of additional liquidity, according to its 2020 annual report. Brookfield holds all of its preferred equity, worth about $441 million, and Hospitality Investors Trust converted the cash payment to payment-in-kind in December to preserve liquidity.

The asset manager’s preferred stake would make up about 43% of Hospitality Investors Trust’s common stock, which has never traded publicly, if converted, according to the report. A restructuring would likely wipe out its existing common shareholders.

Hospitality Investors Trust is under forbearance with its mezzanine term loan lenders until June 30, and modified terms of the loan to set a repayment schedule and waive any default stemming from a bankruptcy filing. The REIT had more than $1 billion of liabilities as of Dec. 31.

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