Wednesday, June 24, 2009

Red Roof Inn Foreclosed on Baltic Avenue

Highly mortgaged Red Roof Inns defaulted on $367 million in debt obligations. Battered CitiGroup owns 79% of the hotel chain. The WSJ reported:

The debt on Red Roof's properties is multilayered and complicated, hinting that Citigroup and the now-defunct Bear Stearns hadn't finished securitizing some of it when the market for commercial mortgage backed securities, or CMBS, shut down in the summer of 2008, according to CMBS analysts. A Citigroup representative declined to comment. At least $367 million of Red Roof's debt is in securitized mortgages. Another $655 million is in mortgages not securitized, and $164 million is mezzanine debt.

Extended Stay Inc., which operates roughly 680 hotels catering to budget-minded travelers on long trips, filed for Chapter 11 bankruptcy protection on June 15. Of Extended Stay's $7.4 billion in debt, $4.1 billion is a securitized mortgage.

The big money boys borrowed heavily during the corporate buyout frenzy. Many of those deals are unraveling. The Carlyle Group's David Rubenstein predicted looming bankruptcies. The red roof fell in. Who's next?

(HT-Economic Policy Journal)