Hospitality Franchise Buys Days Inn Chain
Hospitality Franchise Systems, the parent company of the Ramada and Howard Johnson group, is buying Days Inns of America Inc. for $250 million to create the world’s largest hotel franchise company, both companies said Monday.
The deal leaves Hospitality Franchise, owned by New York investment group Blackstone Capital Partners L.P., with more than 2,300 hotels and 285,000 rooms.
Days Inns said the sale is subject to bankruptcy court approval after the company last Thursday filed for Chapter 11 bankruptcy protection in Wilmington, Del. The filing allows the company to operate with protection from its creditors until it reorganizes.
The chain said the sale should be completed before year-end.
In a move that could complicate the sale, three Days Inn creditors said they had filed an involuntary Chapter 11 petition against the company Friday in bankruptcy court in New York.
Days Inns has struggled with debt for months in the weak hospitality market. In its bankruptcy filing, the company listed assets of $326 million and debts of $400 million.
The bondholders, Northern Life Insurance, Northwestern National Life Insurance Co. and High Income Advantage Trust, said in their petition that Days Inns defaulted on interest payments to them.
A Days Inns spokeswoman said that she was not aware of the petition and that the company’s own Delaware filing would probably supersede the New York filing.
Under the sale agreement, at least $210 million--made up of cash and about a 25% equity interest in Hospitality Franchise--would be paid to Days Inns.
Hospitality Franchise also plans to make a $40-million cash offer to purchase Days Inns bonds.
Hospitality Franchise will acquire Days Inns’ franchise system, its name, trademarks and support services. Days Inns will retain a mortgage portfolio, existing hotel management contracts and certain other assets.
“We intend to preserve and enhance the individual identity of the Days Inns brand along with those of our existing brands,” said Henry Silverman, chairman and chief executive of Hospitality Franchise.
Monty Hundley, chairman of Days Inns, said: “With this transaction, the franchisees of Days Inns will be joining a financially strong company that is exceptionally well-positioned for leadership and growth in the lodging industry.” Andrew Heyer, managing director of Argosy Group, which is acting as financial adviser to Days Inns, said that the deal “represents the best interests of Days Inns creditors and . . . it is the best possible resolution of the financial challenges that Days Inns faced.”
Days Inns is the third-largest hotel chain in the world, with more than 1,200 hotels in the United States, Canada, Mexico, India and Europe. Most of the units are independently owned by franchisees.
