================================================================= LODGIAN BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2001 (ISSN XXXX-XXXX) December 24, 2001 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- LODGIAN BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtor's case. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Any re-mailing of LODGIAN BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO LODGIAN BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF LODGIAN, INC. [00002] LODGIAN'S SEPT. 30, 2001 CONSOLIDATED BALANCE SHEET [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] LODGIAN DEBTORS' CHAPTER 11 DATABASE [00005] A GUIDE TO LODGIAN'S PRE-BANKRUPTCY CAPITAL STRUCTURE [00006] LIST OF DEBTORS' 20 LARGEST UNSECURED CLAIM HOLDERS [00007] DEBTORS' MOTION TO USE SECURED LENDERS' CASH COLLATERAL [00008] DEBTORS' MOTION TO OBTAIN $25 MILLION OF DIP FINANCING KEY DATE CALENDAR ----------------- 12/20/01 Voluntary Petition Date 01/04/02 Deadline for filing Schedules of Assets and Liabilities 01/04/02 Deadline for filing Statement of Financial Affairs 01/04/02 Deadline for filing Lists of Leases and Contracts 01/09/02 Deadline to provide Utilities with adequate assurance 02/18/02 Deadline to make decisions about lease dispositions 03/20/02 Deadline to remove actions pursuant to F.R.B.P. 9027 04/19/02 Expiration of Debtor's Exclusive Plan Proposal Period 06/18/02 Expiration of Debtor's Exclusive Solicitation Period 12/20/02 Maturity of $25MM Morgan Stanley-Arranged DIP Facility 12/19/03 Deadline for Debtor's Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO LODGIAN BANKRUPTCY NEWS ----------------------------------------------------------------- LODGIAN BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) LODGIAN BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's case. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of LODGIAN BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF LODGIAN, INC. ----------------------------------------------------------------- Lodgian, Inc. 3445 Peachtree Road NE, Suite 700 Atlanta, Georgia 30326 Telephone (404) 364-9400 Fax (404) 364-0088 http://www.lodgian.com With 105 (or 106, depending on what you read) hotels containing approximately 19,893 rooms located in 32 states and one hotel in Windsor, Canada, Lodgian, Inc. (OTC Bulletin Board: LODN) is one of the largest owners and operators of both full and limited- service hotels in the United States. The Company's owns 101 hotels and 50% of greater equity interests four others. These hotels are primarily full-service properties, offering food and beverage services, meeting space and banquet facilities. The properties compete in the mid-market as distinguished from the luxury or budget segments of the lodging industry. Substantially, all of the hotels are affiliated with nationally recognized hospitality franchises. The Company owns and operates 16 hotels under franchise agreements with Marriott International and its related brands and 71 hotels under franchise agreements with Six Continents and its related brands which include Holiday Inn, Holiday Inn Express and Crowne Plaza. The remaining hotels are operated under franchise agreements with the franchisers of the Doubletree, Hilton, Radisson and Sheraton brands, among others. Lodgian was formed in December 1998 through the merger of Servico, Inc. and Impac Hotel Group, LLC. Prior to the merger, both companies had portfolios consisting of full and limited- service properties. David Hawthorne, Lodgian's Chief Financial Officer, explains that the Company's business is cyclical with the winter months tending to the low points in terms of occupancy and cash flow, with the period of December 15th to January 15th being the lowest time period operationally. Demand is also dependent upon many factors including general and local economic conditions and changes in levels of tourism and business-related travel. Lodgian's hotels depend upon both commercial and tourist travelers for revenues, and generally, Lodgian's hotels operate in areas that contain numerous other competitive lodging facilities. Notably, Lodgian competes with other facilities on various bases, including room prices, quality, service, location and amenities customarily offered to the traveling public. Mr. Hawthorne says that Lodgian's businesses have been negatively impacted by the general economic slowdown, and in particular, the dramatic decline in both business and leisure travel. On a comparative basis, Lodgian's occupancy rate declined from 67.8% to 55.7% from September 30, 2000 to September 30, 2001. The events of September 11th have exacerbated the pressure on Company's revenues because of a virtual standstill in travel demand. Although travel and occupancy usage has increased since the weeks immediately following September 11th, Lodgian expects the negative impact on travel to continue for the foreseeable future. While travel and occupancy usage has been increasing recently, Lodgian's businesses have not fully rebounded from the effects of September 11th, thereby creating a liquidity crisis during the period in which occupancy and cash flow is normally lower, Mr. Harthorne says. In the months preceding the filing of these cases, the Company initiated discussions with certain of their secured lenders, as well as with an Ad Hoc Committee of their Bondholders to review the Company's financial condition and outline possible restructuring alternatives. Lodgian remains optimistic that these discussions can continue and, hopefully, will enable the Company to identify a core configuration of hotels around which a successful reorganization plan can be supported by their major creditor constituencies. However, the combination of the general economic decline, as well as the current low season of Lodgian's business cycle, left the Company without sufficient immediate liquidity to service their current debt in accordance with its terms and, thus, time to continue their pre-petition negotiations. Notwithstanding the liquidity problems that the Company has encountered over the past number of weeks, Mr. Hawthorne says, Lodgian believes that its business strategy and future prospects remain fundamentally strong. In order to implement a restructuring and reorganization of their businesses, while minimizing the adverse effects of the contraction in credit and other negative factors, the protection of chapter 11 is essential to the Company's ability to preserve and enhance its businesses, businesses, their employees, the communities in which they maintain and operate hotels, and the protection of all parties in interest. Lodgian is optimistic about its prospects for a successful reorganization. Lodgian believes that with the protections afforded by chapter 11, it will be able to continue the positive discussions with its principal creditors, restructure its operations and emerge from chapter 11 as a viable business enterprise. ----------------------------------------------------------------- [00002] LODGIAN'S SEPT. 30, 2001 CONSOLIDATED BALANCE SHEET ----------------------------------------------------------------- LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS At September 30, 2001 (Unaudited) ASSETS Current assets: Cash and cash equivalents .............. $5,625,000 Cash, restricted ....................... 2,996,000 Accounts receivable, net of allowances ................... 17,598,000 Inventories ............................ 7,268,000 Prepaid expenses and other current assets ...................... 9,123,000 -------------- Total current assets ............ 42,610,000 Property and equipment, net ................. 992,231,000 Deposits for capital expenditures ........... 14,422,000 Other assets, net ........................... 23,969,000 -------------- $1,073,232,000 ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ...................... $18,658,000 Accrued interest ...................... 8,782,000 Other accrued liabilities ............. 34,456,000 Advance deposits ...................... 2,062,000 Current portion of long-term obligations .............. 701,358,000 Minority interests - preferred redeemable securities (including related accrued interest) .......... 194,198,000 -------------- Total current liabilities ....... 959,514,000 Deferred income taxes ....................... 3,603,000 Minority interests: Other ................................. 5,547,000 -------------- Total liabilities ............... 968,664,000 Commitments and contingencies ............... -- Stockholders' equity: Common stock, $.01 par value, 75,000,000 shares authorized; 28,479,837 issued and outstanding ..... 284,000 Additional paid-in capital ............... 263,687,000 Accumulated deficit ...................... (157,533,000) Accumulated other comprehensive loss ..... (1,870,000) -------------- Total stockholders' equity ........ 104,568,000 -------------- $1,073,232,000 ============== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- Lodgian Files for Protection Under Chapter 11 ATLANTA, Georgia -- December 20, 2001 -- Today, Lodgian, Inc. (OTC Bulletin Board: LODN) voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in Federal Court in New York. The filing was precipitated by the weaker U.S. economy, the decline in travel since the events of September 11, and the company's heavy debt load. Lodgian, Inc. and most of its operating subsidiaries were included in the filing. The company announced that it has received a commitment for up to $25 million for debtor-in-possession financing, subject to court approval, from a group of lenders led by Morgan Stanley and Lehman Brothers, Inc. This financing will allow the company to operate in the normal course during the bankruptcy proceedings. David E. Hawthorne, the company's CEO since October 1, 2001, said: "The Chapter 11 filing brings us closer to completing the operating and financial restructuring begun by the company in June, 2001. We intend to emerge from bankruptcy in 2002 with strong prospects for revenue and earnings growth. We appreciate the continued support of our many vendors, employees and lenders." Lodgian, Inc. is one of the largest owner/operators of full and mid-priced hotels in the United States, with 106 hotels located in 32 states and one hotel in Windsor, Canada. The company operates hotels under nationally recognized hospitality franchises such as Marriott, Holiday Inn, Hampton Inn, Sheraton and Radisson. ----------------------------------------------------------------- [00004] LODGIAN DEBTORS' CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: Lodgian, Inc. 3445 Peachtree Road, NE, Suite 700 Atlanta, GA 30326 Bankruptcy Case No.: 01-16345 (Jointly Administered) Debtor affiliates filing separate chapter 11 petitions: Lodgian Financing Corp. 1075 Hospitality, L.P. Albany Hotel, Inc. Ami Oeprating Partners, L.P. Apico Hills, Inc. Apico Inns of Green Tree, Inc. Apico Inns of Pittsburgh, Inc. Atlanta-Boston Holdings L.L.C. Atlanta-Boston Lodging L.L.C. Atlanta-Hillsboro Lodging, L.L.C. Brecksville Hospitality, L.P. Brunswick Motel Enterprises, Inc. Columbus Hospitality Associates, L.P. Dedham Lodging Associates I, L.P. Dothan Hospitality 3053, Inc. Dothan Hospitality 3071, Inc. East Washington Hospitality Limited Partnership Fort Wayne Hospitality Associates II, L.P. Gadsden Hospitality, Inc. Hilton Head Motel Enterprise, Inc. Impac Hotel Group, L.L.C. Impac Hotel Management L.L.C. Impac Hotels I, L.L.C. Impac Hotels II, L.L.C. Impac Hotels III, L.L.C. Island Motel Enterprises, Inc. Kinser Motel Enterprises Lawrence Hospitality Associates, L.P. Little Rock Lodging Associates, Limited Partnership Lodgian Ami, Inc. Lodgian Anaheim, Inc. Lodgian Capital Trust I Lodgian Hotels, Inc. Lodgian Mount Laurel, Inc. Lodgian Ontario, Inc. Lodgian Richmond, L.L.C. Manhattan Hospitality Associates, L.P. McKnight Motel, Inc. Melbourne Hospitality Associates, L.P. Minneapolis Motel Enterprises, inc. Moon Airport Motel, Inc. NH Motel Enterprises, Inc. Penmoco, Inc. Raleigh-Downtown Enterprises, Inc. Saginaw Hospitality, L.P. Second Fayetteville Motel Enterprises, Inc. Servico Austin, Inc. Servico Cedar Rapids, Inc. Servico Centre Associates, LTD. Servico Columbia II, Inc. Servico Columbia, Inc. Servico Council Bluffs, Inc. Servico Fort Wayne, Inc. Servico Frisco, Inc. Servico Grand Island, Inc. Servico Hilton Head, Inc. Servico Hotels I, Inc. Servico Hotels II, Inc. Servico Hotels III, Inc. Servico Hotels IV, Inc. Servico Houston, Inc. Servico Jamestown, Inc. Servico Lansing, Inc. Servico Management Corp. Servico Market Center, Inc. Servico Maryland, Inc. Servico Metairie, Inc. Servico New York, Inc. Servico Niagara Falls, Inc. Servico Northwoods, Inc. Servico Omaha Central, Inc. Servico Omaha, Inc. Servico Pensacola 7200, Inc. Servico Pensacola 7330, Inc. Servico Pensacola, Inc. Servico Rolling Meadows, Inc. Servico West Des Moines, Inc. Servico Wichita, Inc. Servico Windsor, Inc. Servico Inc. Sheffield Motel Enterprises Sioux City Hospitality, L.P. Washington Motel Enterprises, Inc. Worcester Hospitality Associates, L.P. Petition Date: December 20, 2001 Bankruptcy Court: United States Bankruptcy Court Southern District of New York Alexander Hamilton Custom House One Bowling Green, 5th Floor New York, New York 10004-1408 Telephone (212) 668-2870 Bankruptcy Judge: Burton R. Lifland Debtors' Bankruptcy Counsel: Adam C. Rogoff, Esq. Gregory M. Petrick, Esq. Barry N. Seidel, Esq. CADWALADER, WICKERSHAM & TAFT 100 Maiden Lane New York, NY 10038 Telephone (212) 504-6000 Fax (212) 504-6666 Debtors' Conflict Counsel: Steven J. Reisman, Esq. CURTIS, MALLET-PROVOST, COLT & MOSLE LLP 101 Park Avenue New York, NY 10178-0061 Telephone (212) 696-6000 Debtors' Investment Banker: Matt Rosenberg CHILMARK PARTNERS LLC 875 N. Michigan Avenue, Suite 3460 Chicago, IL 60611 Debtors' Real Estate Appraiser: R. Mark Woodworth PKF CONSULTING 3340 Peachtree Road NE, Suite 580 Atlanta, GA 30325 Telephone (404) 842-1150 U.S. Trustee: Carolyn S. Schwartz Office of United States Trustee 33 Whitehall Street, 21st Floor New York, NY 10004 Telephone (212) 510-0500 ----------------------------------------------------------------- [00005] A GUIDE TO LODGIAN'S PRE-BANKRUPTCY CAPITAL STRUCTURE ----------------------------------------------------------------- Lodgian and its affiliates are party to a number of different secured and unsecured debt obligations with various lenders: (A) On August 31, 2000, Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. entered into a Consolidated, Amended and Restated Loan Agreement with Capital Company of America LLC with a principal amount of $108,655,655.38 and which consolidated and amended certain loan agreements for secured mortgage loans of Impac II, L.L.C. incurred pursuant to an original facility dated March 12, 1997 and of Impac III, L.L.C. dated October 29, 1997. Each of the loans is secured by a mortgage of the premises, as well as the grant of a security interest in all personal property located on the premises and certain monies and accounts. Impac Hotel Group, LLC and Lodgian, Inc. have entered into guaranty agreements with respect to $10,214,464.70 of the facility. (B) On July 23, 1999, Lodgian Financing Corporation entered into a syndicated credit facility with Morgan Stanley Senior Funding, Inc. and various other lenders from time to time party thereto in the original aggregate principal amount of $365,000,000. The facility is secured by borrower's grant of a security interest in all assets of the borrower. Lodgian, Inc., Impac Hotel Group, LLC, Servico, Inc, Impac Hotels I, LLC and certain other affiliates of the borrower have guaranteed the facility. (C) On July 12, 1999, Lodgian Financing Corp. issued 12-1/4% senior subordinated notes due 2009 in the original aggregate principal amount of up to $200,000,000. The Notes are guaranteed by Lodgian, Inc and certain subsidiaries of Lodgian Financing Corp. and Lodgian, Inc. (D) On April 26, 1999, Dedham Lodging Associates I, Limited Partnership entered into a credit facility with Nationwide Life Insurance Company in the original principal amount of $6,200,000. The facility is secured by a mortgage of the Residence Inn, Dedham, Massachusetts and the grant of a security interest in the other assets of the borrower. Lodgian, Inc. has provided a limited guaranty of certain misconduct (e.g., fraud) of the borrower. (E) On December 8, 1998, the following subsidiaries of Lodgian, Inc. entered into certain credit facilities with Bank One Capital Funding Corporation, Bank One's interests being subsequently acquired by Nationwide Mutual Insurance Company: (1) Island Motel Enterprises, Inc and Penmoco, Inc. entered into a credit facility in the original aggregate principal amount of $4,199,869 with regard to the Holiday Inn/Jekyll Island property and (2) Lodgian AMI, Inc. entered into the following separate credit facilities in the following original aggregate principal amounts: (a) $35,073,117 with regard to the Holiday Inn/Inner Harbor property, (b) $5,214,292 with regard to the Holiday Inn Lancaster, Pennsylvania property, (c) $15,740,722 with regard to the Holiday Inn International Airport (BWI) property and (d) $3,322,817 with regard to the Holiday Inn Glen Burnie, Maryland property. Each facility is fully secured by a mortgage of the respective underlying property and a grant of a security interest in all assets of the respective borrower. Additionally, each loan is cross collateralized with the other properties and cross guaranteed by the other respective borrowers. Lodgian, Inc. has provided a limited guarantee with respect to certain obligations, including misconduct (e.g., fraud) and Servico Operations Corp. has pledged the stock of each of the borrowers as security for the obligations. (F) On June 17, 1998, Lodgian Capital Trust I issued up to 3,500,000 shares of the 7% convertible redeemable equity structure trust securities. The sole asset of the Lodgian Capital Trust I is the 7% convertible junior subordinated debentures due 2010 issued by Servico, Inc. Servico, Inc. has guaranteed certain payments to Lodgian Capital Trust I to the extent that, at the time of payment, sufficient funds are available in the Trust. (G) On May 21, 1997, Macon Hotel Associates, LLC entered into a credit facility with Hospitality Corporation of America in the original principal amount of $8,000,000. The facility is secured by a mortgage of the Crowne Plaza, Macon, Georgia and a security interest in the other assets of the borrower. Impac Hotel Group, LLC has provided a limited guaranty of the facility. (H) On May 21, 1997, Macon Hotel Associates, LLC issued its notes in the original aggregate principal amount of $4,375,000. The notes are secured by Impac Hotel Group, LLC and PCG/Macon Investment Corp's pledge of their respective ownership interests in Macon Hotel Associates, LLC. Additionally the notes are guaranteed by Charles Swanson, Michael Lewitt, Impac Hotel Group, LLC and PCG/Macon Investment Group. Each guarantor's liability is limited to the assets pledged as collateral. (I) On April 11, 1997, Worcester Hospitality Associates Limited Partnership, Servico Frisco, Inc., and Apico Inns of Pittsburgh, Inc. and on June 30, 1997 Fort Wayne Hospitality Associates II, Limited Partnership and Melbourne Hospitality Associates Limited Partnership each entered into separate credit facilities with Lehman Brothers Holdings Inc. The original aggregate principal amount of the distinct facilities was: (1) $5,150,000 with respect to Servico Frisco, Inc., (2) $7,700,000 with respect to Worcester Hospitality Associates Limited Partnership, (3) $5,5100,000 with respect to Apico Inns of Pittsburgh, Inc., (4) $5,600,000 with respect to Melbourne Hospitality Associates Limited Partnership and (5) $1,900,000 with respect to Fort Wayne Hospitality Associates II, Limited Partnership. Each facility is secured by a mortgage of the underlying premises and a grant of a security interest in all assets of the borrower. Servico, Inc, has provided a limited guaranty of each facility. Servico's obligations under each guaranty are limited to liabilities arising from certain misconduct (e.g., fraud) of the borrowers. (J) On March 18, 1997, Atlanta-Boston Lodging, LLC entered into a credit facility with State Street Bank and Trust (as successor in interest to First Union National Bank) in the original aggregate principal amount of $3,600,000. The facility is secured by a mortgage on the Courtyard by Marriott, Boston/Revere Massachusetts property and a security interest in the borrower's other assets. Impac Hotel Group, L.L.C has provided a guarantee and indemnity of the facility guaranteeing payment of those items for which the borrower is personally liable and for which the lender has recourse, including, without limitation, certain misconduct (e.g., fraud) of the borrower. (K) On July 18, 1996, Servico Council Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha Central, Inc., Servico Omaha Inc., and Servico Wichita, Inc. entered into a credit facility with GMAC Commercial Mortgage Corporation in the original aggregate principal amount of $16,840,000. The facility is secured by a mortgage on each of Quality Inn, Council Bluffs, Iowa; Sheraton Four Points, West Des Moines, Iowa; Clarion, Omaha, Nebraska; Sheraton Inn, Omaha, Nebraska; and Holiday Inn, Wichita Airport, Wichita, Kansas and a grant of a security interest in the personal property and other assets of the borrowers. Servico, Inc. has provided a limited guaranty of the facility for certain environmental liabilities and certain misconduct (e.g., fraud) of the borrowers. (L) On January 17, 1996, Brecksville Hospitality, L.P., Sioux City Hospitality, L.P. and 1075 Hospitality, L.P. entered into a credit facility with Loan Services, Inc. in the aggregate principal amount of $12,910,000. The facility is secured by the mortgage of Holiday Inn, Richfield, Ohio; Hilton Hotel, Sioux City, Iowa and Holiday Inn, Augusta, Georgia and a grant of a security interest in the personal property of the borrowers. (M) On June 29, 1995, East Washington Hospitality Limited Partnership entered into a credit facility with Column Financial, Inc. in the original aggregate principal amount of $11,000,000. The facility is secured by a mortgage of the Holiday Inn Airport East, Phoenix, Arizona. (N) On January 31, 1995, Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels, I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motel Associates, Ltd., Wilpen, Inc., Hilton Head Motel Enterprises, Inc., and Moon Airport Motel, Inc. entered into a credit facility with Column Financial, Inc. in the original aggregate principal amount of $60,500,000. The loans are secured by a mortgage on the Fort Wayne Hilton, Fort Wayne, Indiana; the Holiday Inn Meadowlands, Washington, Pennsylvania; the Holiday Inn Phoenix West, Phoenix, Arizona; the Radisson, Phoenix, Arizona; the Holiday Inn, Palm Desert, California; the Holiday Inn, Santa Fe, New Mexico; the Radisson Inn, New Orleans, Louisiana; the Holiday Inn, Hilton Head, South Carolina and the Crowne Plaza, Pittsburgh Airport, Pittsburgh, Pennsylvania. (O) On January 31, 1995, McKnight Motel, Inc. entered into a credit facility in the original aggregate principal amount of $3,900,000 with Column Financial Inc. The facility is secured by a mortgage on the Holiday Inn, McKnight Road premises. (P) On December 29, 1986, Bloomington Kinser Hotel Associates entered into a credit facility with Westinghouse Credit Corporation, whose interest was subsequently acquired by Local Oklahoma Bank, N.A., in the original principal amount of $5,650,000. The facility is secured by the mortgage of the Holiday Inn, Bloomington, Indiana. Additionally Stephen L. Selka and Servico, Inc. have provided a guaranty of the facility. (Q) Servico Lansing, Inc. entered into a credit facility with GMAC Commercial Mortgage Corporation in the original principal amount of $5,687,000. The loan is secured by a mortgage of the Holiday Inn, Lansing, Michigan and the grant of a security interest in the personal property of the borrower. Servico, Inc. has provided a guaranty of certain misconduct (e.g., fraud) of the borrower and certain environmental liabilities. (R) Lawrence Hospitality Associates, L.P. and Manhattan Hospitality Associates, L.P. are lessees under lease agreements for each of the Holiday Inn, Lawrence, Kansas and Holiday Inn, Manhattan, Kansas, respectively. Servico, Inc., has guaranteed the "Reserve Fund" under each lease in an amount up to $695,287.50. Additionally, each of Lawrence Hospitality Associates, L.P. and Manhattan Hospitality Associates, L.P. are, respectively, party to a $12,000,000 and $1,500,000 promissory note which is secured by a leasehold mortgage supporting the payment of the $6,750,000 City of Lawrence, Kansas Commercial Development Revenue Refunding Bonds (Holiday Inn Project) Senior Series 1997A and the $6,750,000 City of Manhattan Kansas Commercial Development Revenue Refunding Bonds (Holiday Inn Project) Senior Series 1997A. (S) Finally, Lodgian Capital Trust I, a subsidiary, issued certain securities. The CRESTS are a "minority interest" and are subordinated to the 12-1/4% Senior Notes. ----------------------------------------------------------------- [00006] LIST OF DEBTORS' 20 LARGEST UNSECURED CLAIM HOLDERS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ Bankers Trust Company 648 Grassmere Park Road Nashville, TN 37211 Attention John Lasher Tel:(615)-835-3100 x 3419 Fax: (615)-835-3409 Indenture Trustee (12-1/4% Senior Subordinated Notes) $200,000,000 Hospitality Restoration & Builders, Inc. c/o Ross & Cohen 711 Third Avenue New York, NY 10017 Tel: (212) 370-1200 Fax: (212) 370-0334 Disputed 10,700,000 Six Continents Hotels Three Ravinia Dr Ste Atlanta GA 30346 Attention Cyril Lurly Tel: (770) 604-2916 Fax: (770) 604-8853 1,848,387 Alliant Food Service 3682 Collections Center Dr. Chicago, IL 60693 Attention Glenda Patterson Alliant Food Service Tel: (800)-572-3813, ext 5614 Fax: (877)-237-7018 1,308,167 Marriott P.O. Box 630885 Baltimore, MD 21263-0885 Attention Shilpa Shikarpuri Tel:(301)-380-3000 Fax: (301)-380-8443 770,306 Hilton 755 Crossover Lane Memphis, TN 38117 Attention Cherry Doris Tel: (901)-374-5416 Fax: (901)-374-5425 503,959 Guest Distribution P.O. Box 7780-4700 Philadelphia, PA 19182-4700 Tel: (800)-772-7676 Fax: (609)-514-1190 421,547 Best Western International, Inc. 2901 North Central Ave. Phoenix, AZ 85012-2788 - and - Best Western International, Inc. P.O. Box 53505 Phoenix, AZ 85072-3505 c/o Brown & Bain Attention Darrel S. Jackson Tel: (602) 351-8000 Fax: (602) 648-7000 Disputed 405,599 IDC Construction 101 Macy Drive Roswell, GA 30076 Attention Gary/Gina Williams Tel: (770)-649-7755 Fax: (770)-649-6292 365,750 Lodgenet Entertainment 3900 West Innovation St. Sioux Falls, SC 57107-7002 Attention Ron Klein Tel: (800) 382-6738 ext. 1818 Fax: (605) 988-1746 Disputed 228,054 On Command PO Box 844485 Dallas, TX 75284-4485 Tel: (720)-873-3200 Fax: (720)-873-3638 201,269 Zimmerman Agency 1821 Miccosukee Commons Tallahassee, FL 32308 Attention Wendy Kerr Tel: (850)-668-2222 Fax: (850)-656-4622 156,361 Matrix Funding Corp NW 7658 PO Box 1450 Minneapolis, MS Attention Christel Smith Tel: (800) 671-7084 Fax: (503) 721-1711 148,341 Starwood SLC Operating LP 33391 Treasury Center Chicago, IL 60694-3300 Attention Drew Heide Tel: (602) 778-4745 Fax: (602) 522-0450 134,946 Sysco Food 3000 69th St East Palmetto, FL 34220-1911 Tel: (941)-721-1450 Fax: (941)-721-1403 112,857 King & Spaulding PO Box 116133 Atlanta GA 30368-6033 Attention Elaine McMahon Tel: (404) 572-4909 Fax: (404) 572-5148 101,162 Waste Management PO Box 930580 Atlanta, GA 31193 Attention Elizabeth Willis Tel: (630)-572-1060 Fax: (630)-495-7196 89,406 Thyssenkrupp Elevator PO Box 1000 Memphis, TN 38148-0227 Tel: (440)-717-0080 Fax: (440)-717-0088 86,410 ITA 2162 Dana Avenue & I-71 Cincinnati, OH 45207-1341 Attention Denise Derauex Tel: (800) 899-8877 Fax: (513) 631-8877 78,359 Echota Fabrics P. O. Box 1749 Calhoun, GA 30703-1749 Attention Mary Marshall Tel: (706)-629-9750 Fax: (706)-629-5229 76,436 ----------------------------------------------------------------- [00007] DEBTORS' MOTION TO USE SECURED LENDERS' CASH COLLATERAL ----------------------------------------------------------------- The Debtors have executed more than 100 hotel mortgages in favor of more than 15 separate lenders or lender groups. Generally, the cash generated by the Debtors' hotels constitutes "cash collateral" in which various of the Debtors' secured lenders assert an interest. Prior to the bankruptcy filing, the Debtors held talks with Morgan Stanley Senior Funding, Inc., and obtained Morgan Stanley's consent to use cash collateral that secures $189,625,000 owed under the MSSF Prepetition Credit Agreement. By this Motion, the Debtors ask the Court to put its stamp of approval on the deal worked-out with Morgan Stanley and authorize the Debtors to impose that same deal on every other lender whose loans are secured by cash collateral. "In order to operate their business, the Debtors require the use of all of the cash generated from their Hotel Properties," Adam C. Rogoff, Esq., at Cadwalader, Wickersham & Taft, tells Judge Lifland. Without Court permission to use the Lenders' cash collateral, the hotels will shut down. The Debtors tell the Court that they are able to (and do) track the cash generated from each of their Hotel Properties. However, for the most part, all cash is commingled. The Debtors explain that they've been evaluating various financial models for their ongoing business, and have carefully analyzed the financial performance of each of their Hotel Properties. The Debtors now categorize their Hotel Properties into two groups: * High Leverage Hotels with a debt to EBITDA ratio exceeding 6:1 Hotel Name Location Mortgagee ---------- -------- --------- Clarion Hotel Raleigh, NC Roundabout Partners Clarion Central Omaha, NE GMAC/Orix Marriott Courtyard LaFayette, LA Capital Corporation Marriott Courtyard Tulsa, OK Capital Corporation Crowne Plaza Macon, GA Fidelity Investments Fairfield Inn Augusta, GA Capital Corporation Fairfield Inn Colchester, VT Capital Corporation Fairfield Inn Jackson, TN Capital Corporation Fairfield Inn Merrimack, NH Capital Corporation Four Points Omaha, NE GMAC/Orix Four Points Des Moines, IA GMAC/Orix Hilton Sioux City, IA GMAC/Orix Holiday Inn Augusta, GA GMAC/Orix Holiday Inn Bloomington, IN Local Federal Holiday Inn Cincinnati, OH Capital Corporation Holiday Inn Clarksburg, WV Capital Corporation Holiday Inn Fairmont, WV Capital Corporation Holiday Inn Florence, KY Capital Corporation Holiday Inn Fort Mitchell, KY Capital Corporation Holiday Inn Hamburg, NY Capital Corporation Holiday Inn Memphis, TN Capital Corporation Holiday Inn Morgantown, WV Capital Corporation Holiday Inn North Miami, FL Capital Corporation Holiday Inn Richfield, OH GMAC/Orix Holiday Inn Syracuse, NY Capital Corporation Holiday Inn Wichita, KS GMAC/Orix Marriott Denver, CO Capital Corporation Mayfair Hotel Miami, FL Capital Corporation Quality Inn Council Bluff, IA GMAC/Orix * Low Leverage Hotels where the debt to EBITDA ratio is less than 6:1 The distinction between Low Leverage Hotels and High Leverage Hotels is a distinguishing factor in the Debtors' formulation of their cash collateral protocol and how they propose to "adequately protect" the interests of the secured lenders. The Debtors propose that: (A) Each Debtor be authorized to use cash in which a Prepetition Mortgage Lender claims an interest only to: (1) pay its own Designated Expenses, meaning that Debtor's: (a) property level operating expenses (including, without limitation, payroll, utilities, food and beverage, taxes, and supplies); (b) capital expenditures; (c) pro rata share (based upon its last month's revenue as a percentage of the Debtors' total revenue) of actual Lodgian corporate overhead expenses for that month; and (d) pro rata share (based upon its last month's revenue as a percentage of the Debtors' total revenue) of the Debtors' actual reorganization expenses, for that Month; but . (e) EXCLUDING any prepetition expenses or interest on any prepetition indebtedness unless authorized by the Bankruptcy Court; (2) pay the Designated Expenses of any other Debtor in its collateral pool (i.e., any Debtors whose properties serve as collateral for each other's secured loans); or (3) make Limited Intercompany Advances, meaning a cash advance which meets each of these criteria: (a) the Debtor making the advance is the owner of a Hotel Property; (b) the Debtor receiving the advance is a Low Leverage Debtor; (c) the cash so advanced is only used to pay Designated Expenses; (d) the cash so advanced constitutes a chapter 11 administrative priority claim secured by a lien on all of the Debtor/borrower's property subject and junior to the Carveout from the DIP Lenders Lien; (e) the Debtor/borrower shall be charged interest at the DIP Rate on cash advanced to such Debtor from the date of advance to the date of repayment; and (f) the cash so advanced may be repaid by the Debtor/borrower at any time without penalty and shall be repaid on the effective date of any plan of reorganization for the Debtor/borrower or upon the sale of the Debtor/borrower's Hotel Property. (B) As "adequate protection" for any diminution in a Prepetition Mortgage Lender's interest in a particular Debtor's property (including cash collateral) resulting from such Debtor's use of such property during its Case, (1) such Prepetition Mortgage Lender shall be granted a replacement lien on all of the prepetition and postpetition property (including, without limitation, all postpetition hotel revenue and other charges) of such lender's Debtor/borrower(s), which lien shall be junior only to (x) any DIP Priming Lien on such property, (y) any Qualified Prepetition Liens on such property and (z) the Carve-out; (2) such Prepetition Mortgage Lender shall be granted a replacement lien on all of the prepetition and postpetition property (including, without limitation, all postpetition hotel revenue and other charges) owned by the Debtors, which lien shall be pari passu with other General AP Liens granted to other lenders on such property, but subject and junior to the Carve-out, but only if a DIP Priming Lien has been granted with respect to such property, and the following liens: (v) any DIP Priming Lien on such property, (w) any Qualified Prepetition Liens on such property and any Sec. 506(c) charges assessed against such liens, (x) any Primed Lender AP Lien on such property, (y) any Specific I/C Lien on such property; and (z) any liens granted to the DIP Lenders under Sec. 364(c) of the Bankruptcy Code on such property, but only if such property is owned by a Low Leverage Debtor. (3) the Mortgage Lenders do not need to re-record their replacement liens; and (4) the Debtors shall provide to each Prepetition Mortgage Lender a monthly statement of operating results and sources and uses of cash with respect to such lender's Hotel Property, no later than 30 days after the end of each calendar month. Finding that the Debotrs have an immediate need to use cash collateral to operate their business, and, that absent the ability to use cash collateral, the Debtors will not be able to operate their business and the Debtors, their creditors and estates will suffer irreparable harm as a result of the loss of the Debtors' going concern value, Judge Lifland grants the Debtors interim authority to access and use their Secured Lenders cash collateral on the terms and conditions proposed, except cash collateral in which Capital Corporation of America asserts an interest. Judge Lifland will convene a hearing on January 9, 2002, to sort out CCA's cash collateral interests and determine whether the Debtors can make their case to show that CCA's interests are adequately protected on an interim basis. Judge Lifland will convene a Final Cash Collateral Hearing on January 23, 2002, to consider entry of a Permanent Cash Collateral Order and to entertain objections interposed by any of the Debtors' Secured Lenders. ----------------------------------------------------------------- [00008] DEBTORS' MOTION TO OBTAIN $25 MILLION OF DIP FINANCING ----------------------------------------------------------------- In addition to using their Secured Lenders' Cash Collateral, the Debtors need additional liquidity to meet their postpetition obligations. Because of seasonal variations in cash flow from their hotel properties, the Debtors project that they will need financing in order to meet their day to day working capital needs and to fund certain capital expenditures. In fact, the Debtors project that cash demands will exceed resources over the next few weeks: Lodgian, Inc. Schedule of Receipts and Disbursements 12/22/01 - 01/18/02 Receipts Hotel revenues $16,057,000 Taxes, partnership income & gratuities 3,451,000 ----------- Total receipts $19,508,000 Disbursements Payroll $10,135,000 Taxes 3,495,000 Vendors, leases & utilities 10,858,000 Construction projects 750,000 Utilities, licenses & contingency payments 2,541,000 Interest 3,050,000 ----------- Total Disbursements $30,829,000 ----------- Net Outflow $11,321,000 =========== Prior to the Petition Date, the Debtors sought additional financing from both new and existing lenders. No potential lender was willing to provide the Debtors (as debtors in possession) with the necessary amount of financing on the basis of securing such advances with junior liens on the Debtors' property under 11 U.S.C. Sec. 364(c). The Debtors also entered into discussions with Morgan Stanley Senior Funding, Inc., which, after a series of good faith, arms-length negotiations, culminated in a debtor- in-possession financing agreement. The Debtors are convinced that the Morgan Stanley-backed DIP Financing is essential to the Company's restructuring efforts and, therefore, is in the best interests of the Debtors, their creditors and their estates. At this critical juncture, Adam C. Rogoff, Esq., at Cadwalader, Wickersham & Taft, tells Judge Lifland, the Debtors urgently need the DIP Financing to instill in their creditors, vendors, employees and customers confidence in the Debtors' ability to meet their postpetition obligations. The DIP Financing is designed to serve these purposes and is necessary for the Debtors to reorganize their businesses. Mr. Rogoff outlines the salient terms of the new DIP Financing Facility: Borrower: Lodgian, Inc. Guarantors: Each of the Debtors (other than Lodgian). Administrative Agent: Morgan Stanley Senior Funding, Inc. Collateral Agent: Morgan Stanley Senior Funding, Inc. Facility: A revolving credit limit of up to $25,000,000 Lenders and Commitments: $12,500,000 Morgan Stanley Senior Funding, Inc. $12,500,000 Lehman Commercial Paper, Inc. Purpose: To fund the working capital requirements of the Debtors, so long as the Debtors' expenditures do not exceed, in both timing and amount, the dollar amounts set forth in calendar year 2002 Budget: 2002 Business Segment Net Cash Flow ---------------- ------------- Lower Leverage Hotels ($9,900,000) Higher Leverage Hotels (3,400,000) Corporate 2,800,000 ------------ Consolidated ($10,500,000) ============ Availability: $10,000,000 upon the entry of an Interim DIP Financing Order and the balance of $15,000,000 after entry of a Final DIP Financing Order. Interest: Loans bear interest at LIBOR plus 3.50% or Base Rate plus 2.5% Maturity Date: December 20, 2002 Fees: The Debtors agree to pay a variety of Fees to the DIP Lenders: * a $500,000 Facility Fee; * a monthly Administrative Fee to the Agent agreed to by the Debtors in a non-public Fee Letter; * 0.75% per annum on every dollar not borrowed; and * customary 2.5% per annum fees on the face amount of each Standby Letter of Credit and Commercial Letter of Credit. Priority and Collateral: The DIP Lenders shall have (i) a first priority Lien on all of the Primed Hotels (although at the Interim Hearing the Debtors will only be seeking a Priming Lien on the MSSF Hotels and related collateral), and (ii) a junior lien on the High Leverage Hotels and Low Leverage Hotels that are not subject to DIP Priming Liens, and in each case, the related collateral, subject to the Carve Out and (x) any Primed Lender AP Lien on such property, (y) any Specific AP Lien on such property and (z) only as to High Leverage Hotels, any General AP Lien on such property. In addition, the DIP Lenders will be entitled to superpriority, administrative expense claim status in the Debtors' cases, subject only to the Carve-Out. Carve Out: The Lenders agree to a carve-out of their Liens for payment of unpaid professional fees and disbursements incurred following any Event of Default by professionals retained by the Debtors and any statutory committees appointed in the chapter 11 cases and for payment of U.S. Trustee fees pursuant to 28 U.S.C. Sec. 1930 and to the Clerk of the Bankruptcy Court plus $1,500,000 Participation: The DIP Credit Agreement provides that any "primed" Prepetition Mortgage Lender (which is an "Eligible Assignee" as defined in the DIP Credit Agreement) may elect to participate as a DIP Lender by assuming a ratable share of the DIP Lenders' commitments, in accordance with procedures set forth in the DIP Credit Agreement. Financial Covenants: The Debtors make three promises to the Lenders in the DIP Financing Facility: (A) The Debtors covenant that their cumulative Adjusted EBITDA for any period beginning on January 1, 2002 and ending on the date indicated will not fall below: For the Period from Minimum Cumulative Jan. 1, 2002 through Adjusted EBITDA -------------------- ------------------ March 31, 2002 $12,900,000 April 30, 2002 $19,300,000 May 31, 2002 $26,700,000 June 30, 2002 $34,400,000 July 31, 2002 $41,700,000 August 31, 2002 $51,500,000 September 30, 2002 $57,600,000 October 31, 2002 $66,300,000 November 30, 2002 $70,800,000 (B) The Debtors covenant that they will not permit the aggregate revenue of the Low Leverage Guarantors to be less than: * $19,000,000 for the month of January 2002 or * $20,800,000 for the month of February 2002 (C) The Debtors covenant that corporate overhead expense (exclusive of unusual items such as Chapter 11 costs, severance expense, office relocation expense and other items reasonably acceptable to the Co-Arrangers) for any month will not exceed: Maximum Corporate Month Ending Overhead Expense ------------ ----------------- January 2002 $2,300,000 February 2002 $2,300,000 March 2002 $2,070,000 April 2002 $1,955,000 May 2002 $1,840,000 June 2002 $1,840,000 July 2002 $1,495,000 August 2002 $1,495,000 September 2002 $1,495,000 October 2002 $1,495,000 November 2002 $1,495,000 December 2002 $1,495,000 Finding that the Debtors have an immediate need to obtain post- petition financing to continue operating their businesses, alternative financing is not available to the Debtors, the terms of the DIP Financing are fair and reasonable and reflect the Debtors' exercise of prudent business judgment consistent with their fiduciary duty and are supported by reasonably equivalent value and fair consideration, and that the financing package has been negotiated in good faith and at arm's-length between the Debtors and the Agent, Judge Lifland authorizes the Debtors to enter into the DIP Financing Facility and borrow up to $10 million from the DIP Lenders pending a Final DIP Financing Hearing on January 23, 2002. Robert J. Levine, Esq. and Michael S. Flynn, Esq., at Davis Polk & Wardwell, represent Morgan Stanley in this matter. *** End of Issue No. 1 ***