10000003713

James H.M. Sprayregen, P.C.
Paul M. Basta
Jennifer L. Marines
KIRKLAND & ELLIS LLP
601 Lexington A venue
New York, NY 10022-4611
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
and
Anup Sathy, P.C. (admitted pro hac vice)
Marc J. Carmel (admitted pro hac vice)
3 00 North LaSalle
Chicago, IL 60654-3406
Telephone: (312) 862-2000
Facsimile: (312) 862-2200
Counsel to the Debtors and Debtors in Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
INNKEEPERS USA TRUST, eta!.,
1
Debtors.
)
) Chapter 11
)
) Case No. 10-10-13800 (SCC)
)
) Jointly Administered
_________________ )
SUPPLEMENTAL AUTHORITY IN SUPPORT OF DEBTORS' OMNIBUS
REPLIES IN SUPPORT OF DEBTORS' PSA MOTION, CASH COLLATERAL
MOTION, CASH MANAGEMENT MOTION, LEHMAN DIP MOTION, AND
FIVE MILE DIP MOTION, AND IN RESPONSE TO OBJECTIONS THERETO
The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtor's federal tax identification
number, are: GP AC Sublessee LLC (5992); Grand Prix Addison (RI) LLC (3740); Grand Prix Addison (SS)
LLC (3656); Grand Prix Albany LLC (3654); Grand Prix Altamonte LLC (3653); Grand Prix Anaheim Orange
Lessee LLC (5925); Grand Prix Arlington LLC (3651); Grand Prix Atlanta (Peachtree Comers) LLC (3650);
Grand Prix Atlanta LLC (3649); Grand Prix Atlantic City LLC (3648); Grand Prix Bellevue LLC (3645); Grand
Prix Belmont LLC (3643); Grand Prix Binghamton LLC (3642); Grand Prix Bothell LLC (3641); Grand Prix
Bulfmch LLC (3639); Grand Prix Campbell I San Jose LLC (3638); Grand Prix Cherry Hill LLC (3634); Grand
Prix Chicago LLC (3633); Grand Prix Columbia LLC (3631); Grand Prix Denver LLC (3630); Grand Prix East
Lansing LLC (3741); Grand Prix El Segundo LLC (3707); Grand Prix Englewood I Denver South LLC (3701);
Grand Prix Fixed Lessee LLC (9979); Grand Prix Floating Lessee LLC ( 4290); Grand Prix Fremont LLC
(3703); Grand Prix Ft. Lauderdale LLC (3705); Grand Prix Ft. Wayne LLC (3704);
K&E 17624046
Innkeepers USA Trust ("Innkeepers") and certain of its affiliates, as debtors and debtors
m possession (collectively, the "Debtors"), hereby submit this Supplemental Authority in
Support of Debtors' Omnibus Replies in Support of Debtors' PSA Motion, Cash Collateral
Motion, Lehman DIP Motion, and Five Mile DIP Motion, and in Response to Objections Thereto
(this "Supplemental Authority") in response to objections (each an "Objection" and,
collectively, the "Objections")
2
to the Debtors' Motion for an Order (A) Authorizing the
Debtors to Assume the Plan Support Agreement and (B) Granting Further Relief [Docket No.
15] (the "PSA Motion"), and in support of the Debtors' Omnibus Reply in support of the PSA
Motion (the "PSA Reply");
3
and, in addition, in support of the Debtors' Cash Collateral
Motion,
4
Cash Management Motion,
5
Lehman DIP Motion,
6
and Five Mile DIP Motion,
7
and in
4
Specifically, the Objections were filed by: (a) Wells Fargo Bank, N.A. ("LNR") [Docket No. 256] (the "LNR
Objection"); (b) Midland Loan Services, Inc. ("Midland") [Docket No. 260] (the "Midland Objection");
(c) the Ad Hoc Committee of Preferred Shareholders [Docket No. 269] (the "Preferred Shareholders
Objection"); (d) TriMont Real Estate Advisors, Inc. [Docket No. 271] (the "TriMont Objection"); (e) C-III
Asset Management LLC [Docket No. 275]; (f) CWCapital Asset Management LLC [Docket No. 276];
(f) Appaloosa Investment L.P. I ("Appaloosa") [Docket No. 279] (the "Appaloosa Objection"); and (g) Five
Mile Capital Partners LLC ("Five Mile") [Docket No. 280] (the "Five Mile Objection"). This Reply refers to
each party that filed an Objection as an "Objecting Party" and to all such parties, collectively, as the
"Objecting Parties").
In addition, Marriott International, Inc. ("Marriott") filed a reservation of rights regarding the Motion [Docket
No. 246] (the "Marriott Reservation of Rights"), as did the official committee of unsecured creditors (the
"Creditors' Committee") [Docket No. 264] (the "Committee Reservation of Rights"). By the Marriott
Reservation of Rights, Marriott seeks only to preserve its rights under its franchise arrangements with the
Debtors. As described herein, the Debtors believe that Marriott generally supports their restructuring efforts
and the PSA (as defined herein). Similarly, the Committee Reservation of Rights seeks only to preserve the
Creditors' Committee's rights to oppose any disclosure statement or chapter 11 plan filed by the Debtors.
(Indeed, the Committee Reservation of Rights expressly states that the Creditors' Committee does not oppose
the Motion: "The Committee is rightfully concerned that the termination of the PSA could pose substantial risk
to the survivability of the Debtors' business. For this reason, the Committee does not oppose the Debtors'
Motion." Committee Reservation of Rights ~ 17 .) Accordingly, the Debtors do not believe either the Marriott
Reservation of Rights or the Committee Reservation of Rights offers any bar to approving the Debtors'
assumption of the PSA.
Debtors' Omnibus Reply in Support of Debtors' Motion for an Order (A) Authorizing the Debtors to Assume the
Plan Support Agreement and (B) Granting Further Relief and Response to Objections Thereto [Docket No.
340]
Debtors' Motion for the Entry of Interim and Final Orders (A) Authorizing the Debtors to (I) Use the Adequate
Protection Parties' Cash Collateral and (II) Provide Adequate Protection to the Adequate Protection Parties
(continued on next page)
2
K&E 17624046
response to the objections
8
thereto (the "Cash Collateral Reply").
9
The Debtors respectfully
submit as follows:
Pursuant to 11 USC 361, 362, and 363, (B) to the Extent Approved in the Final Order, Granting Senior
Secured Priming Liens on Certain Postpetition Intercompany Claims, (C) to the Extent Approved in the Final
Order, Granting Administrative Priority Status to Certain Postpetition Intercompany Claims, and (D)
Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 (b) [Docket No. 13] (the "Cash Collateral
Motion").
Debtors' Motion for the Entry of an Order Authorizing the Continued Use of (I) Existing Cash Management
System, as Modified Herein, (II) Existing Bank Accounts, (III) Existing Business Forms, and (IV) Certain
Existing Investment Guidelines [Docket No. 14] (the "Cash Management Motion").
Debtors' Motion for the Entry of an Order Authorizing the Debtors to Obtain Postpetition Financing from an
Affiliate of Lehman ALI Inc. on a Priming Basis Pursuant to Sections 364(c)(l), 364(c)(2), 364(c)(3), 364(d)(J),
and 364(e) of the Bankruptcy Code [Docket No. 23]; Supplement to the Debtors' Motion for the Entry of an
Order Authorizing the Debtors to Obtain Postpetition Financing from an Affiliate of Lehman ALI Inc. on a
Priming Basis Pursuant to Sections 364(c)(l), 364(c)(2), 364(c)(3), 364(d)(J), and 364(e) of the Bankruptcy
Code [Docket No. 200] (together, the "Lehman DIP Motion").
Debtors' Motion for the Entry of an Order Authorizing the Debtors to Obtain Postpetition Financing from Five
Mile Capital Partners on a Priming Basis Pursuant to Sections 364(c)(l), 364(c)(2), 364(c)(3), and 364(e) of
the Bankruptcy Code [Docket No. 24]; Supplement to the Debtors' Motion for the Entry of an Order
Authorizing the Debtors to Obtain Postpetition Financing From Five Mile Capital Partners on a Priming Basis
Pursuant to Sections 364(c)(J), 364(c)(2), 364(c)(3), and 364(e) of the Bankruptcy Code [Docket No. 201]
(together, the "Five Mile DIP Motion" and with the Lehman DIP Motion, the "DIP Motions").
Objection of C-III Asset Management LLC to Debtors' (1) Motion for the Entry of Final Order Authorizing the
Debtors to Use the Adequate Protection Parties' Cash Collateral and (2) Motion for Entry of an Order
Authorizing the Continued Use of Existing Cash Management System, As Modified [Docket No. 254] (the "C-
111 Asset Management Objection"); Objection of Wells Fargo Bank, N.A., as Trustee for the Registered
Holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through
Certificates, Series 2007-Cl and US. Bank National Association, as Trustee for the Registered of ML-CFC
Commercial Mortgage Trust 2006-4, Commercial Mortgage Pass-Through Certificates, Series 2006-4 to
Debtors' Motion for the Entry of a Final Order (A) Authorizing the Debtors to (I) Use the Adequate Protection
Parties' Cash Collateral and (II) Provide Adequate Protection to the Adequate Protection Parties Pursuant to
11 USC 361, 362, and 363, and (B) To the Extent Approved in the Final Order, Granting Senior Secured,
Priming Liens on Certain Postpetition Intercompany Claims, and (C) to the Extent Approved in the Final
Order, Granting Administrative Priority Status to Certain Postpetition Intercompany Claims and Joinder to the
Objection of Midland Loan Services, Inc. [Docket No. 255] (the "Wells Fargo Objection"); Objection of
CWCapital Asset Management LLC to Debtors' (1) Motion for the Entry of Final Order Authorizing the
Debtors to Use the Adequate Protection Parties' Cash Collateral and (2) Motion for Entry of an Order
Authorizing the Continued Use of Existing Cash Management System, As Modified [Docket No. 257] (the
"CWCapital Objection"); Amended Objection of Midland Loan Services, Inc., Special Servicer for the Fixed
Rate Trustee to (1) the Motion (A) Authorizing the Debtors' to (i) Use the Adequate Protection Parties' Cash
Collateral and (ii) Providing Adequate Protection to the Adequate Protection Parties Pursuant to 11 USC
361, 362, and 363 and (B) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 (b) and (2) Motion for
Entry of an Order Authorizing the Continued Use of (I) Existing Cash Management System, as Modified Here in,
(II) Existing Bank Accounts, (Ill) Existing Business Forms, and (IV) Certain Existing Investment Guidelines
[Docket No. 259] (the "Midland Objection," and together with the C-III Asset Management Objection, the
Wells Fargo Objection, and the CWCapital Objection, the "Objecting Representatives' Objections");
Appaloosa Investment L.P. I's Objection to: (I) Debtors' Motion for the Entry of Interim and Final Orders (A)
(continued on next page)
3
K&E 17624046
1. In connection with objections to the PSA Motion, Cash Collateral Motion, and
Cash Management Motion, the Debtors conducted the deposition of Mr. Kevin Semon of
Midland Loan Services, Inc. on August 27, 2010. Mr. Semon is a vice-president, special
servicing manager for Midland Loan Services, and the Midland representative in charge of
overseeing the special servicing of the Fixed Rate Pool. Because final transcripts were not
available in advance of the Debtors' filing of its PSA Reply and Cash Collateral Reply on
Friday, August 27, 2010, the Debtors were not able to cite the deposition transcript of Mr. Semon
Authorizing the Debtors to (I) Use the Adequate Protection Parties' Cash Collateral and (II) Provide Adequate
Protection to the Adequate Protection Parties Pursuant to II US. C. 361, 362, and 363, (B) To the Extent
Approved in the Final Order, Granting Senior Secured, Priming Liens on Certain Postpetition Intercompany
Claims, (C) to the Extent Approved in the Final Order, Granting Administrative Priority Status to Certain
Postpetition Intercompany Claims, and (D) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 400l(b);
and (II) Debtors' Motion for an Order (A) Authorizing the Debtors to Assume the Plan Support Agreement and
(B) Granting Related Relief [Docket No. 279] (the "Appaloosa Objection"). Midland Loan Services, Inc.
("Midland") previously filed an objection to the Debtors' usage of Cash Collateral and Cash Management
System on July 19, 2010 [Docket No. 36]. C-III Asset Management LLC ("C-111"), Wells Fargo Bank, N.A.,
and U.S. Bank National Association (the "Property Level Lenders"), CWCapita1 Asset Management LLC
("CWCapital"), and Midland are defmed collectively as the "Objecting Representatives." Omnibus Limited
Objection of the Official Committee of Unsecured Creditors to the Debtors' Motions to Authorize the Debtors to
(I) Use Cash Collateral, (II) Obtain Postpetition Financing from an Affiliate of Lehman ALI, Inc., and (Ill)
Obtain Postpetition Financing from Five Mile Capital Partners [Docket No. 265] (the "Committee
Objection") filed by the official committee of unsecured creditors (the "Committee"); (b) Limited Objection of
TriMont Real Estate Advisors, Inc., as Special Servicer, to Debtors' Motion for the Entry of an Order
Authorizing the Debtors to Obtain Postpetition Financing from an Affiliate of Lehman ALI Inc. on a Priming
Basis Pursuant to Sections 364(c)(l), 364(c)(2), 364(c)(3), 364(d)(l), and 364(e) of the Bankruptcy Code
[Docket No. 267] (the "TriMont Objection") filed by TriMont Real. Estate Advisors, Inc. ("TriMont");
(c) Objection of Ad Hoc Committee of Preferred Shareholders to (I) Debtors' Motion for Order Authorizing
Debtors to Assume Plan Support Agreement and (II) Debtors' Motion for Entry of Order Authorizing Debtors
to Obtain Postpetition Financing from Five Mile Capital Partners on a Priming Basis [Docket No. 269] (the
"Preferred Shareholder Objection") filed by the Ad Hoc Committee of Preferred Shareholders (the
"Preferred Shareholder Committee"); (d) Local Texas Tax Authorities' Objection to Debtors' Motion for The
Entry of An Order Authorizing the Debtors to Obtain Postpetition Financing From an Affiliate of Lehman ALI
Inc. on a Priming Basis Pursuant to Sections 364 (c)(l), 364(c)(2), 364(c)(3), 364(d)(l) And 364(e) of the
Bankruptcy Code [Docket No. 287] (the "Taxing Authorities Objection") filed by the Texas counties of
Bexar, Dallas, and Tarrant (the "Texas Taxing Authorities"); and Limited Objection to Debtors' Motion for
the Entry of an Order Authorizing Debtors to Obtain Postpetition Financing from Five Mile Capital Partners
on a Priming Basis [Docket No. 311] (the "Wells Fargo Objection," and, together with the Committee
Objection, the TriMont Objection, the Preferred Shareholder Objection, and the Taxing Authorities Objection,
the "Objections") filed by Wells Fargo Bank, N.A. ("Wells Fargo"). The Committee, TriMont, the Preferred
Shareholder Committee, the Texas Taxing Authorities, and Wells Fargo are defined as the "DIP Objectors."
Debtors' Omnibus Reply in Support of the Debtors' Cash Collateral Motion, Cash Management Motion,
Lehman DIP Motion, and Five Mile DIP Motion, and In Response to Objections Thereto [Docket No. 337]
4
K&E 17624046
in support of their Replies in support of the PSA Motion, Cash Collateral Motion, and Cash
Management Motion.
2. The Debtors submit for the Court's consideration the attached Exhibit A, which
consists of Supplemental Authority in support of the Debtors' replies in support of the PSA
Motion, Cash Collateral Motion, Cash Management Motion, Lehman DIP Motion, and Five Mile
DIP Motion from the deposition of Mr. Semon.
New York, New York
Dated: August 31, 2010
K&E I 7624046
Is/ Paul M Basta
James H.M. Sprayregen, P.C.
Paul M. Basta
Jennifer L. Marines
601 Lexington A venue
New York, New York 1 0022-4611
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
and
Anup Sathy, P.C. (admitted pro hac vice)
Marc J. Carmel (admitted pro hac vice)
300 North LaSalle Street
Chicago, Illinois 60654-3406
Telephone: (312) 862-2000
Facsimile: (312) 862-2200
Counsel to the Debtors and Debtors in
Possession
5
EXHIBIT A
1
2
3
4
5
K. SEMON
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------X
In re: INNKEEPERS USA TRUST
1
et al.
1
6 Debtors.
7
8
9
10
11
12
13
14
15
16
17
18
19
---------------------------------------X
DATE: August 27
1
2010
TIME: 9:33 a.m.
EXAMINATION BEFORE TRIAL of KEVIN
SEMON/ taken by the respective parties/
pursuant to a notice/ held at the offices of
HAYNES and BOONE
1
1221 Avenue of the
Americas/ New York/ New York before a Notary
Public of the State of New York.
20
REPORTED BY: Rebecca Schaumloffel/ RPR
21 JOB #: 32926
22
23
24
25
TSG Reporting- Worldwide 877-702-9580
Page 1
Page 2 Page 3
' - ~
K.SEMON 1 K.SEMON '
APPEARANCES:
2
Attorneys for the Debtors
APPEARANCES: (Continued)
3
KIRKLAND & ELLIS, LLP
4
5 655 Fifteenth Street, N.W.
Attorneys for Lehman ALI Inc.
Washington, D.C. 20005
BY: DANIEL T. DONOVAN, ESQ.
5 DECHERTLLP
Ddonovan@kirkland.com
I 095 Avenue of the Americas
PATRICK KING, ESQ.
New York, New York I0036
Pking@kirkland.com BY: JOSHUA I. SHERMAN, ESQ.
7 Joshua.shennan@dechert.com
8
10
Attorneys for Midland 10 Attorneys for Unsecured Creditors
11 HAYNES & BOONE, LLP
Committee
20 I Main Street, Suite 2200
11 MORRISON & FOERSTER, LLP
12 Fort Worth, Texas 76102
1290 Avenue of the Americas
BY: JOHN D. PENN, ESQ.
12 New York, New York 10I04
13 John.penn@haynesboone.com
BY: PAUL GALANTE, ESQ.
MARK ELMORE, ESQ.
14 Mark.elmore@haynesboone.com
13 Pgalante@mofo.com )
15
14
16
15
Attorneys for Five Mile Capital
i 16 Attorneys for Tremont Capital
17 KASOWJTZ, BENSON, TORRES & i KILPATRICK STOCKTON, LLP
FRIEDMAN, LLP J17 II 00 Peachtree Street, Suite 2800
18 1633 Broadway Atlanta, Georgia 30309
New York, New York IOOI9 18 BY: MICHAEL D. CRISP, ESQ.
19 BY: ALAN LUNGEN, ESQ.
Mcrisp@kilpatrickstockton.com
Alungen@kasowitz.com
19
20
20
21
21
22 Attorneys for LNR Partners
22 Attorneys for Appaloosa Investment
BRYAN CAVE, LLP
23 1290 Avenue of the Americas
SIDLEY AUSTIN, LLP
New York, New York 10104
23 787 Seventh Avenue
24 BY: LAWRENCE P. GOTTESMAN, ESQ.
New York, New York 100I9
Lawrence.gottesman@bryancave.com
24 BY: JOHN J.LAVELLE,ESQ.
25 25
TSG Reporting - Worldwide 877-702-9580 TSG Reporting- Worldwide 877-702-9580
Page 4 Page 5
1 K. SEMON
1 K.SEMON
2
2 KEVIN S EM 0 N, called as a witness,
APPEARANCES: (Continued)
3
3 having been first duly sworn by a Notary
4 4 Public of the State ofNew York, was examined
I'
5 Attorneys for Apollo Investment
5 and testified as follows:
Corporation
6 EXAMINATION BY
6 PAUL, WEISS, RIFKIND,
7 MR. DONOVAN:
WHARTON & GARRISON, LLP
7 1285 Avenue ofthe Americas
, 8 Q. Good morning. Please state your
NewYork,NewYork 10019
19
name.
8 BY: BEN ROTHSTEIN, ESQ.
~ 0
A. Kevin Semon.
Brothstein@paulweiss.com
1 Q. Who are you employed by?
9
10
2 A. Midland Loan Services.
11 3 Q. What is your position?
12
4 A. I am a vice-president, special
*
13
5 servicing manager.
14
6 Q. How long have you worked for
15 7 Midland?
16
~ 8
A. Just under three years.
17
!1-9 Q. Okay. In your work have you
18 I
19
20 become familiar with the Innkeepers'
I
20 21 business?
I
21
'l
A. Yes, I have.
22
Q. Are you familiar with the
23
24
Innkeepers', what's been called in this case
25 the fixed-rate pool?
2 (Pages 2 to 5)
Page 6
1 K. SEMON
2 A. Yes, I am familiar.
3 Q. Can you describe for me what the
4 assets are, at a high level, of the
5 fixed-rate pool?
6 A. 45 extended-stay hotels.
7 Q. And what is --withdrawn.
8 What has Midland determined is
9 the value of the fixed-rate pool hotels?
o A. We really haven't come to a
1 final conclusion. We've evaluated them and
2 have a general range.
3 Q. What is that range?
4 MR. PENN: Objection. So far,
5 folks, the movants have taken the
6 position that valuations is not
7 relevant. So if you are introducing
8 the topic of value, then be ready for
9 that to be a waiver.
~ o MR.DONOVAN: Itisnota
~ 1 waiver. You raised it in your brief.
~ 2 So you can either -- I will reask the
~ 3 question. You can instruct him not to
~ 4 answer or he can answer.
5 Q. So I will ask you again, sir,
Page ,8
1 K. SEMON
2 present value calculations.
3 Q. These net present values, is
4 that something Midland calculated or its
5 consultants or somebody else?
6 A. Midland calculated.
7 Q. In determining your general
8 range of 600 to 650 million for the
9 fixed-rate pool, did you do any other
o analyses other than -- "you" being
1 Midland --other than the net present value?
2 MR. PENN: Objection. The
3 Notice said he was here as Kevin
4 Semon. It was not a 30(b)(6) notice.
5 Q. You can answer.
6 A. Can you repeat the question,
7 please.
8 Q. Sure.
9 Other than the net present value
~ o calculations you described, did Midland do
~ 1 any other analyses or calculations that you
~ 2 are aware of in determining the range of the
~ 3 fixed-rate pool being from 600 to
~ 4 650 million dollars?
~ 5 MR. PENN: Same objection.
1
2
3
4
5
6
7
8
9
o
h
~ 2
3
4
5
6
7
8
p
0
p
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3
14
15
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5
6
7
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0
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!1.4
I
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7
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p
!24
r5
Page 7
K.SEMON
what is the general range that Midland has
determined is the fair value of the
fixed-rate pool?
A. Approximately 600 to
650 million.
Q. How has Midland come to that
conclusion?
A. We have completed our own
analysis. We have spoken with brokers in
the market.
Q. Anything else?
A. Our consultants have completed
some values.
Q. Who are the consultants you are
referring to?
A. One is FTI.
Q. Anyone else?
A. Not that I am aware of.
Q. Can you describe for me the
analysis you are referring to that Midland
did to come to its general range of 600 to
650?
A. We value properties based on
future cash flows. So we prepared net
Page 9
K. SEMON
Q. You can answer.
MR. PENN: Go ahead.
A. I am not aware of other
analysis.
Q. We will get to this in a minute.
Midland, this is-- typically, as part of
its business, values, real estate, hotels
and other businesses, correct?
A. Correct.
Q. And let's go back to the net
present value calculations. A net present
value calculation obviously has future cash
flow projections, correct?
A. Correct.
Q. What projections did you use?
A. We started with the same NOI as
presented to us through the Moelis figures.
However, we have a slightly different
viewpoint as to future growth rates. So we
applied growth rates on an annual basis to
determine future net present -- net
operating income.
Q. And the-- I assume your growth
rate is higher than in the Moelis model?
I
I
3 (Pages 6 to 9)
Page 10
1 KSEMON
2 A. I honestly did not focus on the
3 Moelis model.
4 Q. Can you explain to me what you
5 meant when you said you used slightly
6 different growth rates from the Moelis
7 model?
8 A. As my general understanding, our
9 assumptions are more aggressive, based on
0 market specialists.
1 Q. What do you mean by market
2 specialists?
3 A. There are numerous hotel
4 industry advisory firms that future project
5 what income growth rates can be expected.
6 Q. Is there a specific hotel
7 industry advisory firm that you use?
8 A. There was a report that was
9 produced by PKF.
Do Q. Other than using slightly
D 1 different growth rates, did you modify any
t> 2 of the other numbers or cash flow
t> 3 projections from Moelis in calculating your
t> 4 net present value?
~ 5 A. Again, I didn't focus on the
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
DO
1:>1
1:>2
1:>3
1:>4
1:>5
K. SEMON
Q. Anyone else?
Q. What is the internal credit
review committee?
Page 12
A. It is a team of members from
Midland's staff that have-- that are
required to approve actions either from the
master of special servicing -- based on
delegations of authority. I am a member of
that committee.
Q. Did you present this to the
internal credit review committee in order
for them to approve actions?
A. A case was presented to them.
Q. What do you mean by a case was
presented to them?
A. We prepare an analysis of a
recommendation and it is submitted to the
committee, and in this case, it had net
present values attached.
Q. And what were you recommending
to the internal credit review committee?
A. We have received a draft
proposal for an acquisition of Innkeepers,
Page 11
1 K.SEMON
2 Moelis report.
3 Q. I assume at Midland, on the
4 Innkeepers' fixed-rate pool, you have a team
5 of people working on that?
6 A. No.
7 Q. Is it just you?
8 A. Just myself.
9 Q. Busy man.
0 MR. PENN: Objection. Side bar.
1 Q. Did you generate the net present
2 value calculations yourself?
3 A. Yes, I did.
4 Q. Did you consult or have any
5 input from any other-- any other person in
~ 6 calculating your net present value
~ 7 calculations?
' 8 A. Not that I recall.
9 Q. Have you shared the net present
!:> 0 value calcuh1tions with any individuals
!:> 1 within Midland?
1:>2 A. Yes, I have.
!:> 3 Q. Okay. Who?
~ 4 A. Our internal credit review
!15 committee.
1
2
3
4
5
6
7
8
9
0
p
2
3
4
5
6
7
8
9
~ ~
F
!23
!:>4
P5
Page 13
K. SEMON
and we were seeking the opinions and
thoughts of the credit committee as to that
proposal.
Q. Is the proposal you are
referring to the Five Mile commitment
letter?
A. Yes, it was issued by Five Mile.
Q. In addition to the net present
value calculations you generated, have you
received any valuations of the fixed-rate
pool from other individuals or companies?
A. We have received a valuation
from Eastdil Secured.
Q. Can you spell that?
A. E-A-S-T-D-I-L, Secured,
S-E-C-U-R-E-D.
Q. Who is Eastdil Secured?
A. Eastdil Secured is well known
for their marketing of real estate and
notes. They are highly rated and represent
most financial institutions.
Q. Are they affiliated with Midland
in anyway?
A. Not at all.
4 (Pages 10 to 13)
li
Page 14
1 K. SEMON
2 Q. What did the valuation of
3 Eastdil Secured provide?
4 MR. PENN: Objection. Calls for
5 hearsay.
6 Q. You can answer.
7 A. They provided a value range that
8 supported the special servicer's initial
9 thoughts.
o Q. And what was the range that
1 Eastdil Secured provided for the fixed-rate
2 pool?
3 MR. PENN: OQjection. Hearsay.
4 A. In the range, 600 million, and
5 that would be net of the property
6 improvement plan. If I were to clarify, my
7 prior value analysis is -- also assumed that
8 it was net of the property improvement
9 planned expenditure.
~ 0 Q. Explain to me what you mean by
~ 1 net of the property improvement plans.
~ 2 A. The borrower has identified
~ 3 approximately $52 million of improvements
~ 4 that are necessary at the properties, 16 or
~ 5 17 properties specifically, in order to
Page 16
1 K.SEMON
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2 plans, approximately 610 million. 2
3 Q. In the Jones Lang LaSalle, did 3
4 you request the valuation from them or did 4
5 they provide it to you for other business 5
6 reasons? 6
7 A. We requested the valuation. 7
8 Q. Have you received any other 8
9 valuations of the fixed-rate pool other than 9
0 the one from Eastdil Secured or Jones Lang 0
1 LaSalle? 1
2 A. No, I have not. 2
3 Q. Has Midland received or have 3
4 they generated any valuations of the assets 4
5 in the other pools that Innkeepers has, that 5
6 is not the fixed-rate pool? ~ 6
7 A. No, we have not. ~ 7
8 Q. Have you asked anyone to make 8
9 those calculations? 9
/ o A. No, we have not. II 0
/ 1 Q. Have you read the objection to ill
/2 the Plan Support Agreement filed by Midland? 112
/ 3 A. I have read portions. 113
/4 Q. Have you had-- without asking 114
/5 what it was, but have you had it explained lis
Page 15
K. SEMON
retain the Marriott franchises.
Q. So is it fair to say before the
property improvement plans, your value for
the fixed-rate pool would be 550 to
600 million?
A. No. My value includes the net.
So our net number was 600. So it would be
650 without -- without the property
improvement plan deduction.
Q. Other than the valuation by
Eastdil Secured, have you received any other
valuations of the fixed-rate pool?
A. We also sought a valuation
through Jones Lang LaSalle, their brokerage
hospitality division.
Q. Did Jones Lang LaSalle provide a
valuation?
A. Yes, they did. It is in draft
form.
Q. What is the valuation by Jones
Lang LaSalle of the fixed-rate pool?
MR. PENN: Objection. Calls for
hearsay. Lacks foundation.
A. Net of the property improvement
KSEMON
to you as well?
A. Yes.
Page 17
Q. Do you understand that part of
Midland's objections to the Plan Support
Agreement is that the Plan Support Agreement
has a cap for the fixed-rate pool valuation
at 550 million?
A. Yes.
Q. So it is fair to say part of
Midland's objection is to the valuation of
the fixed rate pool that's contained in the
plan support agreement?
A. Correct.
Q. Do you understand that even if
the Plan Support Agreement is approved, that
Midland retains the right to object to any
future valuation of any plan of
restructuring filed with the Court?
a legal conclusion. Lacks foundation.
A. Yes.
Q. I want to focus on the
fixed-rate pool itself. Before I do that,
Midland is what's known as a special
5 (Pages 14 to 17)
Page 18 I
1 K. SEMON
2 servicer; is that fair?
3 A. One of its work products is
4 special servicing.
5 Q. And can you explain to --
6 withdrawn.
7 Can you explain what a special
8 servicer does?
9 A. The special servicer is a
0 workout consultant hired and assigned for a
1 particular pool of secured CMBS debt. It is
2 our job to resolve assets for -- that are
3 defaulted for the trust.
4 Q. Is that Midland's role with
5 respect to the Innkeepers' fixed-rate pool?
6 A. Yes, it is.
7 Q. And as I understand it, at some
8 point the role goes from master servicer to
9 the special servicer; is that right?
o A. Correct.
J.1 Q. And here, when did Midland --
J. 2 when did the role of servicing the
J.3 Innkeepers' fixed-rate pool transfer from
J.4 the master servicer to Midland?
2 5 A. Middle of April. I do not have
Page 20
1 K. SEMON
2 Q. Since that time, have you been
3 in charge for Midland?
4 A. Yes.
5 Q. Once you received the
6 intercreditor memorandum, what-- in the
7 middle of April, what steps did you take?
8 A. Well, the first step was taken
9 to contact the borrower.
o Q. Who did you contact?
1 A. Marc Beilinson.
2 Q. How did you contact him?
3 A. I was on travel, so by cell
4 phone.
5 Q. What did you discuss with
6 Mr. Beilinson?
7 A. The fact that the loan was in
8 default. The fact that due to default, the
9 lockboxes would be immediately triggered.
~ o All future cash flow would be administered
~ 1 pursuant to the cash management agreement.
~ 2 Q. What did Mr. Beilin son tell you?
3 A. He was trying to sway the lender
4 from triggering the lockbox. Felt it was
J.5 not necessary.
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K. SEMON
the specific date.
Q. How did that occur?
A. We received notice from the
Page 19
master servicer and a recommendation for the
transfer of the asset.
Q. Who was the master servicer?
A. The master servicer still is
W achovia-Wells.
Q. How did you receive notice from
Wachovia-Wells?
A. We received an intercreditor
memorandum.
Q. Are you the person at Midland
that received this intercreditor memorandum?
A. Not initially.
Q. Who did it initially go to?
A. We have individuals that are
responsible for tracking incoming assets.
Q. Once this intercompany-- excuse
me. Withdrawn.
Once the intercreditor
memorandum was received by Midland, was it
then conveyed to you?
A. Yes.
K. SEMON
Q. Anything else?
A. I don't recall.
Page 21
Q. How long was the conversation
between you and Mr. Beilinson?
A. Approximately a half hour.
Q. Do you remember anything else he
said to you or you said to him during this
conversation?
A. I don't recall.
Q. Is it unusual for a borrower to
try to sway the lender not to trigger the
lockbox?
A. Borrowers try to sway the
lender's opinion on many things.
Q. How about on not triggering the
lockbox?
A. Yes.
Q. After your initial discussion
with Mr. Beilinson, what was your next step
with respect to the fixed-rate pool?
A. We contacted the master servicer
and instructed them to immediately spring
alllockboxes and commence cash management.
Q. The lockboxes were triggered on
6 (Pages 18 to 21)
Page 22
1 K. SEMON
2 Apri119, 2010, correct?
3 A. I do not know the specific date.
4 Q. Before -- withdrawn.
5 I understand you don't know the
6 date, but before the date the lockboxes were
7 triggered, had you undertaken any analysis
8 of the hotels in the fixed-rate pool?
9 A. We would not have been assigned
o the asset before we received -- as a
1 transfer from the master servicer.
2 Q. When Midland became the special
3 servicer, did it receive files from
4 Wachovia?
5 A. Yes, it did.
6 Q. How long after the receipt of
7 the intercreditor memorandum until you
8 received the files related to the fixed-rate
9 pool from Wachovia?
2 o A. Since I wasn't the initial
~ 1 direct recipient, I can't comment.
~ 2 Q. What was the first step you took
~ 3 to analyze the assets of the fixed-rate
124 pool?
t:> 5 A. We requested current financial
TSG Repot1ing- Worldwide 877-702-9580
Page 24
1 K. SEMON
2 of the fixed-rate hotels that Innkeepers
3 provided?
4 A. I do not recall what exactly was
5 on the several CDs that were received from
6 the master servicer.
7 Q. Did you receive from Innkeepers
8 the STAR reports you requested?
9 A. We-- I am not exactly sure the
o source, but I did receive some historical
1 STAR reports.
2 Q. When did you begin to inspect
3 the collateral?
4 A. I saw the first properties --
5 well, the day Mr. Beilinson and I had a call
6 in early April, I had just learned that one
7 of the properties was a mile or two away
8 from where I was in Los Angeles. So I saw
9 the very first property in mid April, right
2 0 at the same time the loan transferred.
21 I have since been able to
2 2 inspect two properties in Atlanta, and those
2 3 were within the last month. And an
2 4 associate and I inspected two properties in
2 5 Connecticut.
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Page 23
K. SEMON
statements, STAR reports, and I started to
inspect the real estate collateral.
Q. Did you receive the requested
financial statements -- withdrawn. It is a
bad question. I will ask it a little bit
differently.
Did you receive the financial
statements related to the fixed-rate pool
that you requested from Innkeepers?
A. I can't comment as to
timeliness. Several of the financials
trickled in over time, so I can't say
exactly when which financials were received.
Q. When you requested financial
statements, what kind offinancial
statements were you requesting?
A. Basically, current profit and
loss statements showing the income,
expenses, looking at the property on a
trailing 12 basis, year-to-date basis,
comparison with budget.
Q. When you received the files from
Wachovia, did those files contain the
monthly profit and loss statements for each
TSG Repot1ing- Worldwide 877-702-9580
K. SEMON
Q. Are there any otherhotels you
want to inspect that you haven't had a
chance to yet?
A. I plan on inspecting the
remaining portfolio.
Page 25
Q. Has Innkeepers been cooperative
in giving you access to these hotels?
A. Yes, they have.
Q. From the time that you first
learned that Midland was going to be
operating as a special servicer with respect
to the Innkeepers' fixed-rate pool, how long
was it until you felt that you had a fair
understanding of the collateral within the
fixed-rate pool?
A. I don't know if you ever feel
you have a full understanding. Each day is
an ever-evolving understanding of the
collateral and the market, so I can't say at
any time I had achieved the final answer.
Q. Special servicer Midland has the
opportunity, in fact the duty, to take
certain actions related to the loans,
correct?
7 (Pages 22 to 25)
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Page 26J
K.SEMON 1
A. Yes. 2
Q. As it sees fit. 3
When did you feel you had a good 4
enough understanding to be able to take 5
actions with respect to the hotels? 6
A. Based on my first conversation, 7
I knew I had a defaulted mortgage, and that 8
was the first ticker to me that I have 9
got-- I have action that needs to be taken. ~ 0
Q. As special servicer, when did ~
2
1
3
you first feel comfortable that you had an
understanding regarding the value of the
fixed-rate pool hotels? 4
A. Again, this is an ongoing 5
analysis. It is ever evolving. 6
Q. Do you understand the duties for 7
the special servicer are defined in what's 8
called the Pooling and Servicing Agreement? 9
A. Yes. 10
Q. As special servicer -- I 1
withdrawn. 2
The trust and the CMBS have 3
certificate holders, correct? 4
A. Correct. 5
K.SEMON
Appaloosa?
A. No.
Page 28
Q. How did you become aware that
they-- withdrawn.
How did you become aware that
Appaloosa believes it has a large interest
in the bonds in that trust?
A. We have received a series of
communications and demands.
Q. Have you received those in
writing?
A. Yes.
Q. What kind of demands have you
received from Appaloosa?
A. In generality, open flow of
communication, the financials, and a request
to be included in the decision making.
MR. PENN: Objection. Hearsay.
Q. Have you responded to any of
these demands from Appaloosa?
A. Yes.
Q. What has been your response?
MR. PENN: Objection. Hearsay.
A. The response in writing stated
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Page 27
K. SEMON
Q. And who is the majority
certificate holder?
A. I am not familiar about the
terms such as majority certificate holder.
Q. Who have you been dealing -- is
Five Mile a certificate holder?
A. There are two trusts. I
understand Five Mile is a certificate holder
in one of the trusts, the Lehman
Brothers-UBS 2007 C6 trust.
Q. Are they the largest certificate
holder in that trust?
A. I can't comment on that.
Q. Are you aware of any party that
is a larger certificate holder than Five
Mile in the C6 trust?
MR. PENN: OQiection.
Relevance.
A. One party has come to the
forefront claiming to have a significant
interest in the bonds in the trust.
Q. And who is that?
A. Appaloosa.
Q. Have you had discussions with
Page 29
K. SEMON
that they were not a party to whom we needed
to answer. And the information readily
shared would be the financials and not work
product.
Q. Is there a party to whom Midland
needs to answer?
A. The directing certificate
holders, as they're called, or the most
junior bonds. Controlling class
representatives as well. They are
identified as parties who have the right to
advise in the resolution of assets.
Otherwise, the special servicer's charged
with the ability to resolve the assets.
MR. DONOVAN: Can you read that
last answer back.
(Whereupon, the record was read
by the reporter.)
Q. Who are -- with respect to the
Innkeepers' fixed-rate pool, who are the
directing certificate holders and
controlling class representatives?
A. The primary would be Five Mile
Capital.
!.
:
8 (Pages 26 to 29)
Page 30
1 K. SEMON
2
Q. Any others?
3 A. As the note is split on a pari
4 passu basis with the secondary trust, the
5 second trust has a directing certificate
6 holder, and they have a junior role, but
7 they are a controlling class representative.
8 Q. Who is that?
9 A. Presidio Investments.
0
Q. Does Midland have any ownership
1 interest in the Innkeepers' fixed-rate pool
2 trust?
3 A. No.
4
Q. I want to go back to the
5 communications and demands from Appaloosa.
6 Other than requesting the open flow of
7 information and their demand being included
8 in the decision making, has Appaloosa
9 communicated anything else or made any other
demands?

Q. And why did you -- withdrawn.
Why did Midland tell Appaloosa
114
that they were not a party to whom Midland
115 needed to answer?

--
Page 32
1 K.SEMON
2 are privileged?
3 MR. PENN: Objection.
4 Foundation. Calls for a legal
5 conclusion.
6 A. Correct.
7 Q. Is that the only reason why you
8 are having legal counsel conduct the
9 appraisals rather than Midland?
0 MR. PENN: Same objections.
1 A. I don't specifically recall if
2 there is other rationale that I have.
3 Q. Have any of these appraisals
4 been completed?
5 A. I am not aware of any completed
6 appraisals.
7 Q. Have you provided any reports to
8 Five Mile Capital on the operations of the
9 hotels within the fixed-rate pool?
D.o
A. They are the recipient through
D.1 traditional channels for operating
D.2
statements for any pools in which they are
D.3 invested. So they receive an automatic
D.4
ability to receive that information.
D.5
Q. Do you -- you receive from
TSG Reporting - Worldwide 877-702-9580
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Page 31
K.SEMON
A. Pursuant to the Pooling and
Servicing Agreement, we do not respond --
report to the other bondholders. We have no
duty to do such.
Q. Has Midland conducted appraisals
of the hotels?
A. Midland itself has not ordered
any appraisals.
Q. When you say Midland itself, are
there other parties who are doing
appraisals?
A. Legal counsel.
Q. Under your Pooling and Servicing
Agreement, Midland has an obligation to
conduct appraisals, correct?
A. Correct.
Q. Does Midland always fulfill that
duty by conducting appraisals through legal
counsel?
A. In certain situations, we find
it advisable to order them through legal
counsel.
Q. Is it your understanding that if
legal counsel conduct the appraisals, they
Page
K.SEMON
Innkeepers these financial statements for
each hotel. Do you package them up in any
way to a different report or just forward
them on?
A. The traditional requirement is
to put them into a standardized format,
which is called an OSAR, 0-S-A-R, and that
is readily available through standard trust
reporting services.
Q. In the OSAR format-- well,
withdrawn.
Other than either summarizing or
forwarding the financial information
provided by Innkeepers, is there anything
else included in the OSAR format, such as
commentary or judgments?
A.
Q. Have you provided any of the
valuations of the fixed-rate pool assets to
Five Mile Capital?
A. Overviews of the collection--
overviews of the valuations.
Q. Did you do that in writing or
orally?
33
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9 (Pages 30 to 33)
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K.SEMON
A. In writing.
Q. When did you do that?
A. When we prepared a draft credit
committee approval request, they also
received a copy as directing certificate
holder.
Q. Have you provided your -- the
valuations -- withdrawn.
Page 34
Have you provided the valuations
we discussed earlier to any other person or
party other than Five Mile Capital?
A. Yes.
Q. Who?
A. The brokers that prepared their
opinions of value. They did so under
confidentiality agreements, and they were
provided financials to complete the value.
Q. So before the brokers provided
their valuation, you had provided your
valuation to the brokers?
A. Not my valuation. Not my
valuation. I provided them with historical
operating information.
Q. Did -- other than Five Mile and
Page 36
K. SEMON
speculation. Lack of foundation.
A. It depends on the assumptions
used. This portfolio needs a significant
property improvement plan. If you use the
cash flows to provide those improvements,
the cash flow would be insufficient to cover
debt service.
MR. PENN: Objection.
Non-responsive.
MR. DONOVAN: That's a new one.
Q. Do you believe that the Midland
pool is capable of servicing its own debt
without the PIPs being funded from another
source?
Foundation. Calls for speculation.
A. Not as it's currently required
under the loan documents.
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Q. As the special servicer, does t1 0
Midland want Innkeepers to complete the PIPs til
on the hotels in the fixed-rate pool? t12
A. Midland believes that the value tl3
of the collateral is stabilized by t/4
completing the PIP work and maintaining the F 5
TSG Reporting- Worldwide 877-702-9580 1
Page 35
K. SEMON
your Midland internal credit committee, have
you provided the valuations that we
discussed earlier to any other person or
party?
A. The rating agencies receive a
copy of credit committee memoranda.
Q. Any other person or entity?
A. I am not aware of others.
Q. Other than Five Mile being the
primary contact with respect to the
fixed-rate pool for Innkeepers, do you have
any other interactions with Five Mile in any
other matters?
A. Five Mile is a directing
certificate holder on several of our other
portfolios that are CMBS trusts.
Q. Other than them being the
directing certificate holder, does Midland
have any other relationship with Five Mile?
A. I am not aware of any.
Q. Based on your experience, do you
believe that the fixed-rate pool is
perfectly capable of servicing its own debt?
K. SEMON
Marriott franchises.
Q. And do you believe, by
Page 37
stabilizing these hotels and the Marriott
franchises, that increases or decreases the
value of the collateral in the fixed-rate
pool?
Foundation.
A. I would believe it would be an
increase in value.
Q. Do you believe there are any
benefits in managing the fixed-rate pool due
to the fact that there are 43 hotels as
collateral?
Foundation.
A. I don't believe I understand
your question.
Q. Sure.
You understand there is
different, what I will call tranches.
There's the fixed-rate pool or different
pools. There is the floating rate pool.
And then there is individual hotels within
10 (Pages 34 to 37)
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Page 38 Page 39
1 K. SEMON 1 K. SEMON
2 the Innkeepers enterprise. Do you 2 holder of a whole portfolio of assets. They
3 understand that? 3 are like-type assets, similar quality and
4 A. Yes. 4 type. They can be easily managed as a
5
Q. And the fixed-rate pool is 43 or 5 whole.
6 45 hotels, correct? 6 Q. And is it fair to say the more
7 A. Correct. 7 similar the like hotels that are included in
8 Q. Are there benefits in 8 an enterprise, the likelihood of a greater
9 managing --withdrawn. 9 enterprise value?
0 Do you manage the fixed-rate 0 A. I don't know to the extent where
1
pool as a whole, or do you need to look at 1 enterprise value starts or stops.
2 each hotel in doing your role as special 2 Q. Now, is it your understanding
3 servicer? 3 that FTI is an advisor to Midland, to Five
4 A. I think you have to look at 4 Mile or to both?
5 both. 5 A. FTI was not retained by Midland.
6 Q. Why is that? 6 It was retained by its counsel.
7 A. Each property has different !L7 Q. Have you had discussions with
8 needs, requirements, challenges, so you look ~ 8 special servicers of other debt in the
9 at the assets individually. But at the same
~ 9
Innkeepers enterprise?
bo
time, there is an enterprise value that's po A. Can you rephrase that.
~ 1 created by having a bulk of assets of
p Q. Right. I will set the context
b2
similar type that are managed as a whole. P2
for you.
~ 3 Q. What do you mean by that there 3 There is the fixed-rate pool and
~ 4 is an enterprise value? 4 then there is the special servicer for the I
~ 5 A. It's a value created to a single 5 loans for the individual hotels. Have you
Page 40 Page 41
1 K.SEMON 1 K.SEMON
2 had any discussions with those special 2 servicer industry?
3 servicers? 3 A. At least 20 years.
4 A. Minimal, at most. 4 Q. During that 20 years, have you
5 Q. Under the Pooling and Servicing 5 ever sold assets without shopping them in
6 Agreement-- withdrawn. 6 the market?
7 With Five Mile as the 7 A. Sold assets without shopping
8 controlling class representative, is it your 8 them?
9 understanding that Five Mile can terminate 9 Q. Yes.
0 Midland as its special servicer without 0 A. Occasionally notes can be sold
1 cause? 1 if the value is correct without-- we
2 A. Yes. 2 generally meet a requirement of widely
3 Q. Has Midland undertaken any steps 3 marketed, is our minimum standard. We
4 to attempt to sell the Midland loans to 4 believe the market is the best determination
5 date? 5 of true value for assets.
6 A. I don't understand what you mean 6 Q. What do you mean by a widely
7 by Midland loans. 7 marketed standard?
8 Q. Sure. I will rephrase. 8 A. The asset is presented to the
9 Has Midland, what's used in the 9 market through traditional channels, either
DO
briefs, shopped the fixed-rate pool?
/Q
brokerage or websites or through auction
Ill A. I am not aware of it being /1 companies. There is an active marketing
D2
openly marketed for sale.
p2
campaign. The public is made well aware of
~ 3 Q. I know you have been at
p the asset type. Investors are notified.
~ 4 different companies. How long have you been p4 So we believe that more than
~ 5 what you would consider in the special /5
just an internal relationship is associated.
TSG Reporting - Worldwide 877-702-9580 TSG Reporting - Worldwide 877-702-9580
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Page 42
K. SEMON
We are seeking opinions from the market from
as many people as we can.
Q. I think you said before, you
have occasionally sold without doing a
widely marketing process.
A. Yes.
Q. In those circumstances, how did
you determine the appropriate value?
Relevance.
A. I have sold notes whereby the
borrower has given us 100 percent of
principal or compensating factors which we
believed were more beneficial for a quick
timely sale than going to the market.
Q. What do you mean by compensating
factors?
A. Each case is unique. Could be
litigation. Could be property issues.
Could be -- there is many different issues
that could be at hand.
Q. In your role as special
servicer, have you ever been a special
servicer of assets that have been in
Page 44
1 K. SEMON
2 collateral.
3 Q. What do you mean by market value
4 of the collateral?
5 A. That the valuation of the note
6 was subject to either open bidding for the
7 real estate or people had the opportunity to
8 file either competing plans and overbid.
9 Q. Do you consider the Five Mile
0 commitment letter a competing bid?
1 A. Yes.
2 MR. DONOVAN: Let's take a
3 break.
4 (Whereupon, a recess was taken.)
5 BY MR. DONOVAN:
6 Q. Mr. Semon, have you reviewed the
7 Plan Support Agreement that Innkeepers is
8 seeking court approval on?
9 A. Yes.
~ 0 Q. Do you believe the Plan Support
~ 1 Agreement Innkeepers is seeking court
~ 2 approval of prohibits Midland-- withdrawn.
~ 3 Do you believe the Plan Support
~ 4 Agreement Innkeepers is seeking court
~ 5 approval of prohibiting Innkeepers from
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K.SEMON
bankruptcy?
A. Yes, I have.
Page 43
Q. And through that process, have
you ever received, through the bankruptcy
process, for the assets, a note representing
their fair value, through the bankruptcy
process?
A. I'm sorry.
Q. Sure. I will repeat it.
Withdrawn.
Based on your work as a special
servicer of assets that are in bankruptcy,
have you ever received a note through the
bankruptcy process for the fair value of
those assets at the conclusion of the
bankruptcy?
A. Yes.
Q. And have there been occasions
where you have received a note for the fair
value of those assets where those assets
were not what we call shopped to the market?
A. I cannot remember recent cases
where we have not had a market value
associated with the valuation of the
TSG Rep01iing- Worldwide 877-702-9580
Page 45
K.SEMON
determining the value of the fixed-rate pool
exceeds 550 million?
a legal conclusion.
A. Yes.
Q. So it is your understanding even
if Innkeepers later determines that the
fixed-rate pool is worth 560 million, they
are legally prohibited from assigning a
value of $560 million in a plan?
a legal conclusion.
A. I don't believe it is part of
the terms of the plan.
Q. How have you come to that
understanding?
A. I didn't read it as a term of
the plan.
Q. Did you read the Plan Support
Agreement as not providing a fiduciary out
if Innkeepers later determines that the
value ofthe fixed-rate pool exceeds
$550 million?
12 (Pages 42 to 45)
Page 46 Page 47
1 K. SEMON 1 K.SEMON
2 a legal conclusion.
12
Apollo is a party and signed the Plan
3 A. Why don't you restate it, 3 Support Agreement; is that right?
4 please. 4 I will reask the question.
5 Q. Sure. 5 A. Yes.
6 Based on your reading of the 6 Q. Is it your understanding that
7 Plan Support Agreement, is it your 7 Apollo is a party, that is someone who
8 understanding that if Innkeepers later 8 signed the Plan Support Agreement?
I'
9 determines, for example, that the iiXed-rate 9 A. I don't-- I don't recall if
0 pool is worth $560 million, that it has the 0 they signed it directly. But they are
1 right through the fiduciary out provision to 1 definitely a proposed beneficiary under the
2 assign such a value? !1.2 plan.
~ 3
Q. And how will they be benefited
~ 4
under the Plan Support Agreement, "they"
5 A. Yes. 5 being Apollo?
6 Q. Based on your reading, who are 6 A. They will be receiving an
7 the parties to the Plan Support Agreement? 7 interest in the reorganized debtor.
8 MR. PENN: Objection. Best 8 Q. What is the interest?
9 evidence rule. 9 A. 50 percent, I believe.
).Q
A. Clearly, Lehman. Very clearly, 0 Q. Ofthe post-confirmation equity,
I
1 Apollo.
p
correct?
2 Q. Anyone else? p A. Yes.
3 A. Five Mile as to the debtor in p Q. Is Apollo having to pay for any
4 possession financing.
/4
of that benefit?
~ 5 Q. So it is your understanding that
/5
A. Yes.
Page 48 Page 49
2 Q. How much? 2 A. Why don't you reask the question
3 A. Round numbers, I 07 million. 3 again.
4 Q. And Apollo owned equity interest 4 Q. Sure.
5 in Apollo before the bankruptcy; you 5 Based on your review of the
6 understand that, right? 6 documents, the Plan Support Agreement, your
7 MR. PENN: Objection. You might 7 involvement in this bankruptcy proceeding,
8 want to reask that question. 8 is it your understanding that Apollo
9 MR. DONOVAN: Tell me why. 9 Investment Corporation is not going to
0 MR. PENN: Because you said 0 receive any economic benefit based solely on
1 Apollo owned equity interest in 1 its prior ownership of equity
2 Apollo. 2 pre-bankruptcy?
3 MR. DONOVAN: Thank you. 3 MR. PENN: Objection. Calls for
4 Q. Is it your understanding that
~ 4
a legal conclusion. Best evidence
5 Apollo Investment Corporation owned equity
~ 5
rule.
6 interest in Innkeepers before the 6 A. I have concerns that they have a
7 bankruptcy? 7 guarantee they have not fulfilled and
8 A. Yes. 8 through this reorganization plan they would
9 Q. Is it your understanding that 9 be forgiven from their obligations.
).Q
Apollo is not getting any economic recovery
/Q
Q. Now, Apollo has agreed with
n based on the equity Apollo Investment Corp.
/1
Lehman to purchase 50 percent of Lehman's
).2
owned before the bankruptcy?
/2
post-confirmation equity, correct?
~ 3 MR. PENN: Objection. Calls for
/3
A. I understand that's correct.
~ 4 a legal conclusion.
/4
Q. Does -- would Midland object to
~ 5 Q. Want me to reask it?
r5
the Plan Support Agreement even if Apollo
TSG Reporting- Worldwide 877-702-9580 TSG Reporting - Worldwide 877-702-9580
....
13 (Pages 46 to 49)
K. SEMON
was not purchasing any of Lehman's
post-confirmation equity?
A. Correct.
speculation. Also, calls for a legal
conclusion.
Page 50
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A. My answer was, correct. 8
Q. Why does Midland object to the I 9
Plan Support Agreement even if Apollo wasn't

speculation. Calls for a legal
conclusion.
A. The primary concern is this is
an internal -- an internal deal. It has no 6
reflection on the market and its valuation 7
for the collateral. And that's an objection
9
8
that is shared throughout with the borrower. a
Further objection is the fact lz 0
that the plan provides for a consolidated / 1
reorganization, and we believe that's /2
inappropriate, as our collateral is being / 3
utilized for other purposes. / 4
Q. Anything else? / 5
Page 52
1 K. SEMON
2 mean by your objection because the plan
3 provides for a consolidated reorganization
4 and the fixed-rate pool's collateral be used
5 for other purposes?
6 A. Yes.
7 Q. Can you explain what you mean?
8 A. It is our understanding, based
9 on the analysis provided from the borrower,
o that our properties generate cash flow above
1 and beyond the payment of debt service
2 required, and that other portfolio
3 properties that are not our collateral are
4 using that cash to sustain operations.
5 Q. Since filing the bankruptcy,
6 there is no what has been called inner
7 tranche borrowing that you are aware of,
8 correct?
o speculation.
1 A. I am not aware, without
2 receiving financials.
Q. Would you object iflnnkeepers
as an enterprise uses some of the fixed-rate
5 pool collateral from time to time during
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K.SEMON
MR. PENN: Same objections.
A. No.
Q. Okay. I take it from your
objection, that it is not reflecting the
internal market -- withdrawn.
I take it your objection that
Page 51
this is an internal restructuring is based
on your view that the collateral is worth
more than 550 million?
MR. PENN: OQject to form.
A. Our objection is it has not been
produced to the market to determine the
value.
Q. So you believe it should be --
sorry. What was your term? What to the
market? Withdrawn.
Is it your view that it is
better if the assets are produced to the
market even if it turns out that the market
believes the fixed-rate pool is only worth
500 million rather than a $550 million
valuation, for example?
A. Correct.
Q. Can you explain to me what you
Page 53
K. SEMON
this reorganization but the fixed-rate pool
gets it paid back before Innkeepers exits
bankruptcy?
speculation.
A. My collateral should be used for
my collateral and solely for that purpose.
Q. Is it your understanding that--
withdrawn ..
Do you believe the fixed-rate
pool hotels receive any benefit from being
part of the Innkeepers enterprise family?
A. No.
Q. Do you believe the hotels in the
floating rate pool receive any benefits from
being part of the Innkeepers enterprise
family?
A. Can't comment.
Q. Okay. Do you believe any of the
individual hotels that are basically one
hotel benefit from being part of the
Innkeepers enterprise family?
A. I can't tell.
Q. One of the goals of Midland
I
14 (Pages 50 to 53)
Page 54
1 K. SEMON
2 during this restructuring is to get -- to
3 get the collateral on the fixed-rate pool
4 out of the Innkeepers enterprise, correct?
5 A. I don't care if it stays in or
6 out. But the treatment has to be fair and
7 equitable. And market.
8 Q. Do you believe there is a way
9 under the plan envisioned by the Plan
o Support Agreement that the fixed-rate pool
1 collateral could be valued in a way that you
2 believe would be fair, equitable and
3 market--
4 MR. PENN: Objection.
5 Q. -- even if it exceeded
6 $550 million?
7 MR. PENN: I apologize.
8 Objection. Calls for speculation.
9 A. I don't think so.
D. o Q. Why not?
D.1 A. The first example that comes to
D. 2 my mind, I have a guarantee provided by
~ 3 Apollo. I can't imagine they are going to
~ 4 step up under their guarantee, under a
~ 5 potential plan such as this.
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speculation.
A. It would need to be subject to
Page 56
further negotiation. It would need to cover
our concerns that we have about market value
for the collateral. About segregation of
the cash flows. About proper funding for
the assets, for current and future work.
Also the management of the hotels. We also
have concern about the direction of the
portfolio by the borrower.
So we have major -- we have
numerous items that need to be addressed
before we can even think of the scenario.
Q. What meetings have you had with
Innkeepers discussing plans of
reorganization?
A. We had a face-to-face meeting
that was unproductive. There have been some
requests for subsequent meetings. They were
not held because there was such a difference
in the viewpoints, there was rio commonality
that could be seen, that we were playing
either two different sports or speaking two
Page 55
1 K. SEMON
2 Q. But Midland sued Apollo,
3 correct?
4 A. Correct.
5 Q. So you can recover whatever
6 you're legally entitled to through that
7 lawsuit, correct?
8 A. We intend to continue.
9 Q. Well, rather than continue it,
0 isn't it true, sir, that whatever the
1 fixed-rate pool is entitled to from Apollo
2 could be recovered through that lawsuit?
5 MR. ROTHSTEIN: Objection.
6 A. Could be.
7 Q. That's why you brought the
8 lawsuit, correct?
9 A. Correct.
/ 0 Q. So if you are made whole for
/ 1 whatever you believe Apollo owes you through
/2 that lawsuit, is there a way that there
/3 could be a fair, equitable and market
/ 4 process for the fixed-rate pool within an
::> 5 internal restructuring?
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K. SEMON
different languages.
The borrower has yet to
Page 57
acknowledge the willingness to have a market
viewpoint for the collateral or consider the
consolidation issues. Therefore, we have
not held any additional meetings with the
borrower.
Q. There has been no additional
meetings because it is Midland's view there
should be no meetings unless the borrower is
open to having a market perspective, true?
A. Correct.
Q. Let's talk about the first
face-to-face meeting. That was held, where
the borrower came to Kansas City, correct?
A. Correct.
Q. Who attended that meeting?
A. From our side, I was in
attendance. Lawrence Mittman from Haynes &
Boone. Carolyn Sullivan from Haynes &
Boone.
Marc Beilinson was there on
behalf of Innkeepers. He had two members of
the Innkeepers management staff with him.
15 (Pages 54 to 57)
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K. SEMON
581
11
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6
7
There were representatives of
Moelis and his legal counsel.
I don't know if I am forgetting
somebody, but that's my best recollection.
Q. Sure.
How long did the meeting last?
A. It was a very short meeting,
actually.
Q. An hour?
A. Approximately, at most.
Q. What was discussed?
A. Not much. We had issues with
confidentiality agreements and misstatements
about the confidentiality agreement. So the
meeting was completely unproductive.
We were told the borrower is
coming with a signed copy of the
confidentiality agreement. In fact, they
showed up with an unexecuted copy, and when
we demanded execution, we were only provided
signatures for part of the borrowing entity,
claiming that part is not able to execute.
Without -- without the
confidentiality agreement, we did not
K.SEMON
misstatement.
MR. PENN: I believe you will
find it in the document production.
A. I'm sorry. I said
confidentiality agreement versus
pre-negotiation agreement.
Q. That's fine.
Is this a standard agreement
Midland uses?
A. Correct.
Q. You said it was partially
Page 60
executed and not partially executed. Can
you explain what you mean? Who executed?
A. The borrower executed but the
guarantors did not, including Apollo and
other guarantors.
Q. Can you remember anything else
about the meeting other than what you have
told me this morning?
A. I just -- I guess to me, after
the meeting had occurred, and following the
circumstances that I found later on, I found
that there was numerous misrepresentations
of fact of what is occurring at the time.
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K.SEMON
discuss nor meet.
Page 59
Q. What is the confidentiality
agreement you are referring to? I:
A. Prior to negotiating terms with I;
any borrower, there is a standard course of
business to obtain a standard mutually
acceptable confidentiality agreement between
the borrowers, guarantors and the lender.
Q. Just in general, what does this
Midland confidentiality agreement provide
for?
A. Generally, nothing discussed,
said, spoken of, is a modification, change
or alteration of the terms of the current
loan documents until mutually accepted,
approved and in writing.
MR. PENN: Objection. Best
evidence rule.
Q. Do you have a copy of the
confidentiality agreement?
MR. PENN: I believe it is
called a pre-negotiation agreement,
and I believe you will find --
A. Sorry, yes. That's a
Page 61
K. SEMON
Q. What misrepresentations of fact
do you believe were made?
A. Very specific regarding the
status of the discussions with Lehman, as to
the reorganization plan.
Q. Anything else?
A. That's the primary.
Q. What was told to you at this
meeting in Kansas City by the borrower
regarding the status of discussions with
Lehman?
A. Certainly not that any plan had
been achieved, negotiated, discussed or
proposed. It was that they were in the
midst of working with creditors.
Q. Did the borrower tell you they
were meeting with Lehman specifically?
A. I cannot recall exactly their
statements.
Q. Other than the first
face-to-face meeting, I understand there
were no other face-to-face meetings
regarding a plan of reorganization. Did you
have telephone conferences with the debtor
16 (Pages 58 to 61)
'
Page 62
1 KSEMON
2 about a plan of reorganization?
3 MR. PENN: Object to the form.
4 A. I don't recall.
5 Q. Has Midland provided Innkeepers
6 an alternative plan other than the one
7 envisioned for the Plan Support Agreement
8 with Lehman?
9 A. In my discussions and responses
o to Mr. Beilinson's requests for meetings, I
1 told him we are willing to discuss plans
2 that provided for a market approach to
3 value, and as an additional term, the
4 non-consolidation of cash flows.
5 So in those discussions and
6 responses, we have shared with them what we
7 needed to be brought to the table for us to
8 discuss other plans.
9 Q. Before today, have you been
I 0 willing to meet with the borrower regarding
I 1 alternative plans that dido 't include a
72 market approach?
13 A. No.
24 Q. Okay.
25 A. We are speaking different
Page 64
1 K. SEMON
2 offices of Marriott's legal counsel, and at
3 that time, we noted that we would be willing
4 to infuse all capital necessary on the
5 condition that they tum over the collateral
6 to a court-appointed receiver.
7 And for clarification, yes, we
8 did have an additional -- the borrower was
9 in attendance of that meeting.
o Q. When was that meeting?
1 A. I do not recall. It was after
2 May.
3 Q. Who attended this --where did
4 this meeting take place?
5 A. The law offices of Sheppard
6 Mullin, legal counsel for Marriott at
7 30 Rockefeller Center.
8 Q. Who attended for Midland or
9 representing Midland?
2 o A. I believe Leonard Parkins,
/ 1 Lawrence Mittman, myself. Katherine Young
/2 from Marriott. She had another associate
/ 3 with the firm, her firm of Marriott.
/4 Marc Beilinson was there.
/ 5 Representatives believe from
Page 63
1 K. SEMON
2 languages.
3 Q. Before today, have you been
4 willing to meet with the borrower regarding
5 alternative plans that included the
6 consolidation of cash flow?
7 A. That included the consolidation?
8 Q. Yes.
9 A. We are not interested in
0 consolidation of cash flow.
1 Q. So is it fair to say unless the
2 borrower is willing to do a market approach
3 and not a consolidation of cash flows,
4 Midland is not willing to discuss
5 alternative plans of reorganization with the
6 debtor?
~ 7 A. Correct.
~ 8 Q. Is it fair to say Midland has
9 not itself made an offer to purchase the
P 0 equity of Innkeepers or-- withdrawn.
P 1 Midland has not made an offer to
P 2 infuse cash into Innkeepers to become the
P 3 equity owner?
P 4 A. For clarification, we had a
P 5 meeting earlier on with the borrower at the
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K. SEMON
Kirkland & Ellis were there, as well as
counsel from Sheppard Mullin.
Page 65
Q. How long did this meeting last?
A. Probably not long. Maybe an
hour.
Q. What was discussed?
A. Marriott started the
presentation noting the fact that the
borrower had failed to complete the PIP
work. That negotiation has been ongoing for
over 18 months. The borrower had failed to
find a funding source or to meet the
requirements of the franchises.
Marriott had provided
termination notices for the franchise.
Marriott had showed pictorially how the
properties failed to achieve the Marriott
standard and they were subject to
termination.
Q. Fair to say a lot of these
hotels in the fixed-rate pool are not in
very good shape, correct?
A. Clearly, at least the 17
properties that are subject, 16 or 17
17 (Pages 62 to 65)
Page 66 Page 67
2 properties that are subject to this PIP work 2 of Midland. Midland would never receive
!
3 do not meet Marriott standards and therefore 3 anything from discussions. Midland is a
4 are low in the ratings for the franchise. 4 representative of a trust.
5 Q. And their condition impacts 5 Q. Fair enough. I guess my
6 their cash flow potential, correct? 6 question is a little different.
7 A. Correct. Because it affects the 7 A. Correct.
8 marketability of the property. 8 Q. Have you told Mr. Beilinson you
9 Q. What else was discussed at this 9 would not accept on behalf of the trust any
0 meeting at Marriott, with Marriott legal 0 equity in Innkeepers?
1 counsel's office? !1.1 A. I don't believe it is an
2 A. I think that was the primary ~ 2 appropriate investment for a REMIC,
i
3 subject that I recall. 0.3 R-E-M-I-C, trust.
4 Q. What did you say?
~ 4
Q. Based on that viewpoint, I
5 A. Well, my conclusion was,
p
assume that Midland or you would not accept
6 borrower, I will fund this money, step 6 on behalf of the REMIC trust equity in
7 aside. I will protect the assets. We will 7 Innkeepers?
8 take care of it ourselves, but we don't need 8 MR. PENN: Objection. Calls for
9 the borrower anymore. 9 speculation.
~ 0
Q. Anything else?
)0
A. Correct.
~ 1 A. I don't recall.
)1
Q. Was anything else discussed at
~ 2
Q. Have you ever told Mr. Beilinson
)2
this Marriott meeting? Or withdrawn.
D.3 that Midland will never take any equity in
p
Was anything else discussed at
D.4 Innkeepers? 4 this meeting at Marriott's legal counsel's
D.5 A. You speak ofMidland, and equity 5 office?
TSG Reporting- Worldwide 877-702-9580 TSG Reporting- Worldwide 877-702-9580
Page 68 Page 69
1 K.SEMON 1 K. SEMON
2 A. I don't recall. 2 back and forth, not willing to even meet
I.
3 Q. Other than what you have told me 3 unless all these terms are acceptable, I am
4 this morning, have you had any other 4 assuming we have no ability to meet with
5 discussions with the debtors regarding 5 them to discuss this.
6 potential plans of reorganization? 16
Q. Well, the inability to meet is
7 A. I don't recall. 7 Midland's view, right? They are the ones
8 Q. Has Midland made any 8 putting the conditions on the meeting,
9 presentations to the debtors presenting 9 correct?
0 Midland's view of its value ofthe 0 A. These conditions we believe are
1 fixed-rate pool? 1 consistent with the servicing standard,
2 A. No. 2 which is the standard in which we manage our
3 Q. Why not? 3 assets. And for us to discuss without them
4 A. I don't know if we have a need 4 would mean, I believe, we would be remiss in
5 to. It is solely our opinion. We are 5 our duties as the special servicer for the
6 really ultimately seeking the market's 6 trust.
7 opinion, not our opinion.
p Q. That's fair enough. But these
8 Q. Do you believe it would inform 8 are conditions that Midland is putting on
9 the debtor to understand Midland's view of 9 the discussions, correct?
~ 0 the value ofthe fixed-rate pool collateral? ~ 0 A. Yes.
~ 1 MR. PENN: Objection. Calls for b Q. Has Mr. Beilinson from
~ 2 speculation. ~ 2 Innkeepers ever refused to attend a meeting
~ 3 A. Value is not the sole issue at ~ 3 to discuss reorganizations?
~ 4 hand here. There is numerous other issues. ~ 4 A. I am not aware of him refusing
~ 5 And based on the numerous calls we have had ~ 5 to attend.
TSG Reporting- Worldwide 877-702-9580 TSG Reporting - Worldwide 877-702-9580
''" 'v'' ... ..
18 (Pages 66 to 69)
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K. SEMON
Q. Has Midland made an offer --
withdrawn.
Page 70
As I understand Midland's
objection, they believe that Lehman is
getting more value than it should through
the post-confirmation equity; is that fair?
MR. PENN: Objection. Form.
Mischaracterizes the documents.
A. Yes.
Q. And has Midland made an offer to
purchase any of Lehman's post-confirmation
equity?
A. As I discussed earlier, a REMIC
trust has the inability to hold equity
investments.
Q. Has Midland reached out to any
other parties, such as Five Mile, to see if
it would be interested in purchasing any of
the Lehman's post-confirmation equity?
A. It is not my job to market or to
seek such payment.
Q. I want to talk about the
August 20 Five Mile commitment letter you
received. Fair to say on August 20, Five
Page 72
K. SEMON
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of business numerous inquiries as to this I 2
portfolio. And in all cases, I forwarded or 3
directed them to Mr. Beilinson directly. 4
I am uncertain whether Five Mile 5
tried to contact or did contact them 6
directly. But other such parties, I know, 7
contacted and were denied information to try 8
to make a competing plan. 9
Q. Okay. Who are these other 0
parties that had inquiries that you directed !11
to Mr. Beilinson? 2
A. There has been numerous parties 3
contacting us. I think Blackstone Equity 4
Investments, Deutsche Bank. Just trying to 5
think of this last week. There is a 6
constant flow of people interested in the 7
portfolio. Numerous other parties. I don't 8
recall at this time. 9
Q. But sitting here today, you're 0
not aware of whether or not Five Mile ever 1/1
provided that August 20th commitment letter 22
whether they
A. I do not know. 5
Page 71
KSEMON
Mile through an affiliate conveyed a binding
commitment for the acquisition of Innkeepers
USA Trust to Midland?
A. Yes.
Q. Did you forward that letter to
Innkeepers?
A. No.
Q. Whynot?
A. I don't believe I have any
requirement to do such.
Q. Did you think it would have --
withdrawn.
Wouldn't it have informed the
debtors to know that there was an entity out
there making a proposed acquisition of
Innkeepers?
speculation.
A. I again don't think it is my
responsibility to provide notice to them.
Q. Did you ask Five Mile to provide
it to the debtor?
A. I believe in most cases, we have
notified -- we received through the course
Page 73
K. SEMON
Q. Did you see drafts of the
August 20th commitment letter before you
received the executed letter?
A. I don't believe -- I believe it
is still a draft document. Even as of
today. I think it is a work product.
Q. Why do you believe it is still a
draft today?
A. We have still been discussing
terms that would be necessary to receive our
support.
Q. So fair to say as oftoday,
Midland has not accepted this binding
commitment from Five Mile?
A. Correct.
Q. Did you receive drafts of what
eventually became the August 20th letter
from Five Mile before August 20th?
A. I don't have my files or I can't
recall. I don't know what exact date I
received specific notice of a plan, and what
version of the plan it was.
Q. Well, sure. I guess I am
asking, did this kind of commitment letter
19 (Pages 70 to 73)
I
Page 74 Page 75
1 KSEMON 1 K. SEMON
2 on August 20th come out of the blue or had 2 time been negotiated or is in the process of
3 you been discussing with Five Mile that they 3 being renegotiated.
4 would provide this? I 4 Q. Are you the point person for
5 A. This was -- I was unaware that 5 Midland negotiating?
6 Five Mile was going to file or create any 6 A. Yes.
7 such plan. 7 Q. Who is the point person for Five
8 Q. Okay. Once you received this 8 Mile negotiating?
9 letter on August 20th, what steps did you 9 A. I believe it is Almond
o take to review it? 0 Nickerson.
1 A. Well, of course, we reviewed it 1 Q. So fair to say the offer by Five
2 through legal counsel. We looked at the
3 treatment as specifically towards our debt.
4 Understood the treatment of other debtors in
5 the bankruptcy. Identified what terms
6 worked for us and what didn't work. What
7 needed further negotiation.
~ 2 Mile that's contained in the August 20,
~ 3 2010, letter to you is not acceptable in
!L 4 that form to Midland?
!
11.5 A. There are portions that were
~ 6 acceptable, but some that are still subject
7 to negotiation.
8 Q. And what terms needed further 8 Q. But it would be fair if we told
9 negotiation?
o A. The allocations of payment to
1 different creditors. The treatment of the
9 the Court Midland does not accept the
P 0 August 20th commitment letter as presented,
P 1 true?
2 subject debt. The bifurcation of the note P 2 A. Correct.
~ 3 into tranches. You know, we are still P 3 Q. Now, on the draft-- withdrawn.
~ 4 negotiating multiple levels ofthis !I 4 Earlier we talked about a
5 document. So most every term has at some
) 5 memorandum that you presented to, I believe
j TSG Reporting- Worldwide 877-702-9580
Page 76 Page 77
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~ 0
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you called it your internal credit 2
committee? 3
A. Yes. 4
Q. And how long was this report? 5
A. Maybe about 12, 15 pages. 6
Q. Can you just-- I haven't seen 7
it, so can you summarize it for me? 8
A. It is a presentation whereby we 9
describe recommendations for approval, 0
background of the loan, discussion of the 1
collateral, discussion of value of the 2
collateral, discussion of alternatives, 3
discussion of profitability. Basically, 4
loss scenarios under each of these. 5
Q. Can you describe for me the 6
recommendation or recommendations you were 7
making to the committee? 1 8
A. At that time, it was the terms 9
that had been negotiated as of that point. p 0
Q. So were you seeking approval for !21
certain terms you were in agreement with and I 2
then saying -- I guess I am trying to 13
understand what you were seeking either I 4
approval of or recommendations for. I 5
A. We were seeking approval of the
negotiations as of that point. The result
of our committee was a requirement for
additional changes, and we were still
working on negotiating those additional
changes at this time.
Q. Now, the August 20 Five Mile
commitment letter, part of their plan is to
have a breakup fee, correct?
A. Yes.
Q. Does Midland agree that Five
Mile should be entitled to a breakup fee?
A. A breakup fee has traditionally
been included with a stalking horse bidding
type process like this, because of the
effort and work that they are putting into
this, so if they are not the resulting
purchaser, they get compensation for their
work. It is a standard term that we see in
stalking horse bidding.
Q. Is that a term that Midland
agrees with?
A. It is part of a plan that gets
us where we want to be.
20 (Pages 74 to 77)
Page
1 K. SEMON
2 Q. Based on your-- sorry.
3 A. Ultimately, yes.
4 Q. Does the Plan Support Agreement
5 that Innkeepers is seeking approval of
6 provide any kind of break up fee to Lehman
7 that you are aware of?
8 MR. PENN: OQjection. Legal
9 conclusion. Best evidence rule.
0 A. I don't recall.
1 Q. As part of Five Mile's offer,
2 one of the terms of that offer is that
3 Midland would have to seek to terminate the
4 debtors' exclusivity period, correct?
5 A. Yes.
6 Q. And part of Midland's proposed
7 offer to Midland is it envisioned a plan
8 where each of the different pools could take
9 their collateral out of the Innkeepers
enterprise, correct?
MR. PENN: Object to form.
Midland offer to Midland.
MR. DONOVAN: Thank you.
Withdrawn.

Q. Part of Five Mile's commitment
Page
1 K. SEMON
2 Are you aware that Innkeepers
3 has provided, is obligated to continue to
4 provide what is called a 13-week cash flow
5 projections as part of the cash collateral
6 order?
7 A. I have not received it right
8 now.
9 Q. Okay. How is Midland paid for
0 its services as special servicer?
1 A. Midland is provided compensation
2 via the Pooling and Servicing Agreement.
3 Q. Can you summarize for me the
4 fees that Midland is provided?
5 A. We receive a monthly fee and
6 then we receive a fee upon the final
7 resolution of an asset.
8 Q. What is the monthly fee?
9 A. Monthly fee on this loan is
20 .15 percent of the outstanding principal
21 balance of the loan, until such time as the
22 loan is a collected mortgage, and at that
23 time, it is . 75 percent of collections.
That would be both of monthly payments
and/or the final payoff of the loan.
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Page 79
K. SEMON
letter envisioned a plan in which each of
the pools could take the collateral out of
the Innkeepers enterprise, correct.
A. Correct.
Q. And what you view, ifthis plan
would proceed, is that Midland would
exercise its right to take its collateral
out of the Innkeepers enterprise?
speculation.
A. If Midland is treated fairly in
other terms that we approve, there is no
need to.
Q. Regarding cash segregations you
were talking about before, Midland does want
Innkeepers to keep using fixed-rate pool
cash to operate the fixed-rate hotels,
correct?
A. Yes.
Q. Have you reviewed the 13-week
cash flow as part of your work?
A. I don't know who -- which cash
flow you are referring to. 1,
Q. Sure.
K. SEMON
Q. What is the fee upon final
resolution?
A. That is it. That is the fee.
Q. Thank you.
Page 81
Who have you worked for before
Midland? Just give me a summary.
A. Certainly.
Key Bank. Capital Crossing
Bank. It is a Lehman Brothers subsidiary.
Ameresco, Lend Lease, ITT Federal Savings
Bank, a subsidiary of Michigan National
Bank, Mortgage Investors, Pension Fund
Advisor.
Then I worked for-- I just
forgot his name. Poor guy. I worked for a
developer in California. A real estate
developer. Robert Meyer. Robert Meyer.
Q. I believe you said earlier you
have been in what we can call the special
servicing industry for about 20 years?
A. Yes.
Q. Now, in dealing with Five Mile
regarding your negotiations regarding the
commitment letter, have you sent them
21 (Pages 78 to 81)
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Page 82
K.SEMON
written communications?
A. Most of my communications have
been via legal counsel. So we have been
negotiating this. We have had a couple of
verbal discussions. But primarily it is
through legal counsel and edits to the draft
letter.
Q. Do you have any objection to
having a consolidated cash management if
Innkeepers continues to show Midland that
there is no inner tranche borrowing?
speculation.
A. My -- I don't see what the
benefit of that would be. If they are going
to go that far to show there's no inner
tranche borrowing, they are going to be
showing that there is no -- you have to
identify what my income and my expenses are.
So through that process, if you are saying
this is your income, these are your
expenses, this is your accounting, you're
not consolidated.
Q. Well, dollars are fungible,
K. SEMON
A. Yes. It was basically operated
that way preceding the bankruptcy.
Q. You are aware before 2007 and
Page 84
before these hotels were kind of put into
different pools, all these hotels were run
the same way through a consolidated cash
management? You are aware of that, correct?
Relevance.
A. I have no idea what the
structure was, what the financing structure
was. So I can't comment.
Q. So you're not aware of what the
individuals who were negotiating and
actually originated these loans understood
the consolidated cash management of
Innkeepers to be at the time?
A. I have no idea what their
understanding was in that origination.
Q. Are you aware of any written
offers that have been presented to
Innkeepers since the petition date regarding
a plan of reorganization?
A. That were received by
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Page 83
K.SEMON
correct?
A. Yes.
Q. If you put the money in the pot
but every two weeks Innkeepers is showing
you your revenue, the revenue of other
folks, here is the allocated expenses, do
you have any objection to Innkeepers
continuing to do its consolidated cash
management?
speculation. Also improper
negotiation.
A. Yes, we do. Our cash needs to
be segregated separately. It should be
monitored separately. We are a separate
lender from the others, and it needs to be a
separate full accounting, not just an
identification of shares. Separate
accounting. Separate accounts.
Accountability.
Q. So under your view, Innkeepers
should be run as kind of multiple companies,
a fixed-rate pool, a floating rate pool, and
then the individual hotels; is that correct?
Page 85
K. SEMON
Innkeepers?
Q. Correct.
A. I am not aware of any.
Q. Are you aware of any written
offers regarding a plan of reorganization
that have been provided to Innkeepers?
A. I have no idea what's been
provided to Innkeepers.
Q. But you're not aware of someone
who has provided a written plan of
reorganization to the debtors since the
plan, since the petition date, correct?
A. I am not aware. I know parties
have contacted them seeking information to
prepare a plan. But no information was
provided to them to do such.
MR. DONOVAN: Can we mark this,
please.
(Whereupon, the August 20, 2010,
letter from Five Mile to Midland was
marked as Semon Exhibit 1 for
identification as of this date by the
Reporter.)
Q. Mr. Semon, you have been handed
1.
I
22 (Pages 82 to 85)

Page 86
1 K. SEMON
2 what's been marked as Semon Deposition
3 Exhibit 1, an August 20, 2010, letter from
4 Five Mile Capital Partners to Midland Loan
5 Servicing, to your attention.
6 A. Yes.
7 Q. You have seen this document
8 before, correct?
9 A. Yes, and many similar to it.
o Q. This is what we have been
1 referring to as the Five Mile commitment
2 letter, correct?
3 A. Yes.
4 Q. Let's go to Page 3 of this
5 letter, please.
6 A. Okay.
7 Q. Under the illustration,
8 explanation of debt restructuring, Five Mile
9 has the fixed-rate mortgage loan providing
0 $225 million of debt forgiveness. Do you
~ 1 see that?
~ 2 A. Yes.
3 Q. Do you agree with that term?
2 4 A. Debt forgiveness?
2 5 Q. Yes. That that would be
Page 88
1 K. SEMON
2 spelled out in this exhibit.
3 Q. Sure. Can you show me where?
4 A. I guess it -- how do I say -- it
5 is throughout. So if you want to go every
6 page by page, sentence by sentence, we can
7 see how it proposes the treatment of the
8 debt. It is in footnotes, in details
9 throughout this document, so --
0 Q. Let's go to Page 4.
1 A. Okay.
2 Q. See if it helps. On Page 4
3 under debt forgiveness and paydowns, it
4 says, "Fixed-rate CMBS," all caps,
5 mortgage loan." That's the fixed-rate pool,
6 correct?
7 A. Yes.
8 Q. There it says reduction to
9 $600 million to start, correct?
~ o A. That's what it says.
~ 1 Q. What do you understand a
~ 2 reduction to $600 million to mean with
P respect to the fixed-rate loan?
~ 4 A. As I read the rest of it, there
~ 5 is a discussion of a B note. So when they
Page 87
1 K. SEMON
2 appropriate?
4 speculation. Ambiguous.
5 A. I don't know what the definition
6 truly of debt forgiveness is. It can have
7 many interpretations.
8 Q. Have you asked Five Mile?
9 A. Well, I have seen how they refer
~ 0 to our plan and the treatment of our debt.
~ 1 So if you consider debt forgiveness as how
~ 2 they are treating our debt.
~ 3 Q. I will ask you that way. How do
4 you understand Five Mile would treat your
5 debt under this proposed commitment letter?
6 A. I am sorry. Could you restate
7 that question.
8 Q. Sure.
9 I think you said you understand
> 0 the way Five Mile envisions treating the
> 1 fixed-rate pool debt under their plan, so to
P 2 speak. Can you explain to me how you
~ 3 understand that, what would happen to the
> 4 fixed-rate pool debt?
5 A. The fixed-rate pool debt, it's
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Page 89
K. SEMON
say a reduction to 600 million, we believe
the $525 million note is broken based on
this presentation to an A note and the B
note. And that the A note is in the amount
of $600 million.
Q. What is the A note?
A. The A note would be
$600 million. The B note would be
225,400,000. 225,400,000.
Q. What do you understand the B
note to provide?
A. I don't understand your
question.
Q. Sure.
You said under the Five Mile
plan, it is your understanding there would
be an A note for 600 million and a B note
for $225 million.
A. Yes.
Q. What are the differences between
the two notes?
A. Well--
evidence rule.
23 (Pages 86 to 89)
Page 90
1 K. SEMON
2 A. Ifl flip to Page 5, there,
3 under section Romanette five, titled
4 "Fixed-Rate CMBS Mortgage Loan," in caps,
5 there is a treatment of the A note that
6 notes, as it states here, that there is a
7 proposed interest rate of 6. 71 percent,. and
8 no change to the existing maturity date of
9 July 9th, 2017.
o It notes that amortization will
1 begin 48 months after the confirmation of
2 the plan and will be based on the 30-year
3 amortization schedule. Release prices will
4 be established, that each property can be
5 released at 115% ofthe allocated loan
6 amount.
7 The loan is subject to
8 prepayment and par without penalty. And
9 finally that they are going to allocate an
DO FF&E budget in the amount of7.84 million.
1 That's what we believe the
2 treatment of the A note to be.
P Q. Okay. What is treatment ofthe
B note?
A. Well, let's look through this
Page 92
1 K. SEMON
2 evidence rule.
3 Q. Under this plan by Five Mile, is
4 it your understanding that Five Mile is
5 assigning values to each of the loans based
6 on its own analysis?
7 A. I think there is-- there is a
8 concept here of a release for 115 percent of
9 allocated loan amount for each property. No
o such chart has been developed so far. So I
1 have no idea how they are going to be
2 allocated at this time.
3 Q. What is the total debt that this
4 plan envisions for Innkeepers?
5 MR. PENN: Objection. Best
6 evidence rule.
7 A. It's -- I guess there is another
8 term that should be brought out regarding
9 the A note before I describe it. They are
1:> o also proposing a $66.4 million paydown of
1 the $600 million A note. So as regards to
the fixed-rate CMBS mortgage loan, it
3 appears that we have a note in the amount of
$533,600,000 that would then be securitized
5 by first-party lien on 45 properties, and
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K. SEMON
agreement here.
evidence rule.
A. Throughout, there is -- let's go
to -- let's go to section -- I will find the
right page.
It is on Page 4 under the
Page 91
heading "Debt Forgiveness and Paydowns."
Under "Fixed-Rate CMBS Mortgage Loans," if
we read the second sentence, it states, "The
company's issuance ofB notes to lender,
which notes we agree to purchase immediately
for ten million in cash."
So they are allocating an
additional payment to the lender often
million at that time for the B notes.
Q. For the entire B notes, correct?
A. Correct.
Q. So the recovery to Midland
Trust, let's say, would be a new note at
600 million plus $10 million in cash and a
cash paydown of $66.4 million, correct?
A. Correct.
Page 93
K. SEMON
that the -- Five Mile would be retiring the
debtor in possession loan which was senior
lien. So we would then have a senior lien
on collateral with a balance paydown.
So if you say regarding this
particular note, I don't know. If you are
asking for an answer as to the treatment of
the debt as told for the whole portfolio --
I guess I need clarification of the
question.
Q. Sure. I will reask the
question.
You understand this plan by Five
Mile would result in Five Mile owning the
equity of Innkeepers?
A. Yes.
Q. Okay. And the capital structure
there would be a certain value, certain
amount of debt, and the rest would be
equity?
A. Urn-hum.
Q. What is the total amount of debt
that would be placed on Innkeepers under
this Five Mile plan?
24 (Pages 90 to 93)
K. SEMON
evidence rule.
A. I guess you have to look at
these charts, and it appears in a column
Page 94
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noting fmal balance, I think it's basically
saying that -- it appears that they are
proposing $803,400,000 worth of debt secured
by the entire portfolio oflrmkeepers.
Q. And the $803 million of debt is
more debt than would result-- that's
envisioned under the Plan Support Agreement?
A. I don't recall the total amount
and how they compare.
Q. Sir, do you intend to attend the
hearing on September 1st before
Judge Chapman?
A. I haven't been requested to
attend at this time.
Q. If you are requested, will you
willingly attend?
A. I believe I am available.
DO
~ 1
~ 2
~ 3
~ 4
Q. Great. Thank you for your time.
That's all I have today.
5 MR. PENN: Let's take a break.
Page 96
1 K.SEMON
2 A. The gross value, that would be
3 approximately 700 to 650. Because you would
4 be netting out the 50,000 estimated for
5 capital expenses to come to the net number
6 of600.
7 Q. You said 50,000 of capital
8 expenses?
9 A. Property improvement plan work.
0 Q. 50,000?
1 A. I am sorry. 50 million. The
2 zeros.
3 Q. And at one point you also
4 mentioned that a treatment should be fair,
5 equitable and market. Do you recall that?
6 A. Yes, I do.
7 Q. When you refer to a market
8 treatment, what are you referring to?
9 A. Especially the valuation of the
~ o collateral. That the value being assigned
~ 1 to the collateral is deemed to be what
~ 2 willing, ready and able investors in the
~ 3 market would be willing to pay for that
~ 4 collateral.
~ 5 Q. And how is that market value
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K. SEMON
(Whereupon, a recess was taken.)
EXAMINATION BY
MR. PENN:
Q. Mr. Semon, I have a few
clarifying questions.
Page 95
At one point, you had mentioned
that there was some property inspections
that you had done. Did you include all of
the inspections or was there one that had
been omitted?
A. Yes. I omitted. I inspected
four of the Innkeepers properties that were
located in Chicago.
Q. And about when did that occur?
A. That would be probably the last
weeks of July of this year, 2010.
Q. In your testimony regarding
valuation, you used the term net of the
property improvement plan items. Do you
recall that?
A. Yes, I do.
Q. If the net number was
600 million to 650 million dollars, what
would the gross number be?
Page 97
K. SEMON
determined or established, the way you refer
to it?
A. The way I refer to it, by widely
marketing the assets for sale, providing
open financials and open marketing, so we
provide -- purchasers are provided
historical information, access to the
collateral, so they are able to then make
their own independent decisions.
Q. Is an internal restructuring, as
it has been described by Innkeepers,
something that would qualify as a market in
the way you used the term?
A. I do not believe so, because it
does not seek the value other than from one
source, which was an internal relationship.
It doesn't seek the market's opinion as to
value ofthe asset.
Q. You had also mentioned the
internal write-up that you provided to the
credit review committee. Do you recall
that?
A. Yes.
Q. You said that that had been
25 (Pages 94 to 97)
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K.SEMON
provided to Five Mile?
A. Correct.
Q. When was that provided?
A. I believe the specific date was,
if I remember correctly -- I don't remember
the date. Sorry.
Q. If you don't recall, do you have
something handy that --
A. Do you have a copy of the
transmittal note? I don't remember the
date.
Q. But, first, I am just going to
mark as Semon 2 the Deposition Notice that
brought us here today. I didn't know if you
ever actually had a chance to see that or
not.
(Whereupon, the Deposition
Notice was marked as Semon Exhibit 2
for identification as of this date by
the Reporter.)
A. No.
MR. DONOVAN: Doyouhave a
copy?
MR. PENN: Ijust brought one.
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Page 100
K. SEMON
bar.
MR. DONOVAN: Well, is it true?
Has this been produced before,
Mr. Penn?
MR. PENN: I believe I am the
one asking the questions right now.
MR. DO NOV AN: I am asking you,
sir, on the record, has this been
produced before, Mr. Penn?
MR. PENN: I am not here to give
a deposition.
MR. DONOVAN: Has it been
produced before, Mr. Penn?
MR. PENN: I am not here to give
a deposition.
MR. DONOVAN: Well, just so it
is clear, usually, when you are going
to use exhibits at a deposition and
they have been requested, it is not
really the appropriate way to go to
not produce them.
MR. PENN: Objection to side
bar.
MR. DO NOV AN: I hear you not
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Page 99
K. SEMON
(Whereupon, the E-mail dated
August 23, 2010, was marked as Semon
Exhibit 3 for identification as of
this date by the Reporter.)
Q. I am handing you what has been
marked as Exhibit 3. Could you identify
that, please?
A. Yes.
Q. What is it?
A. It is an E-mail that I released
addressed to AI Nickerson, Collin Neblett,
Sandra Ruffin --
MR. PENN: Before we have
testimony, we have to pass out the
exhibits.
MR. DONOVAN: I will note for
the record this is a document Midland
refused to produce previously. It is
un-Bates numbered, and consistent with
my e-mails and conversations with
Mr. Penn, he refused, and this is the
first time it is being presented.
Q. You may proceed.
Page 101
K. SEMON
saying that you did produce it, so we
will take it you did not.
bar.
A. This is my E-mail dated
August 23, 2010, at 3:55p.m., and addressed
to Almond Nickerson, who is with Five Mile
Capital, and Collin Neblett with Presidio
Investments. This was addressed to them as
the -- per their role as controlling class
representatives.
It is also addressed to a Sandra
Ruffin, R-U-F-F-I-N, with Moody's,
M-0-0-D-Y-S, to Standard & Poor's, and to
Fitch, F-I-T-C-H, as the rating agencies for
the two subject trust pools.
And basically attached is a copy
of our initial review memorandum discussing
the competing plan proposal from Five Mile
based on the draft at that time.
Q. And is what appears starting on
Page 2, is that the --
A. Yes.
Q. The document that you provided?
. . .
26 (Pages 98 to 101)
Page 102
1 K. SEMON
2 A. Page 2 is a document --
3 Q. Excuse me, Page 3.
4 A. Page 3 was a Word document that
5 was attached to the E-mail containing the
6 case, which is -- in our line of work is
7 called a request for approval, and attached
8 also to the E-mail was an Excel file that
9 included net present value calculations.
o Q. Was the case that's included in
1 Exhibit 3 approved by the credit review
2 committee?
3 A. Portions were approved.
4 Additional terms were requested and subject
5 to negotiations.
6 Q. Did you receive -- were comments
7 received back from Five Mile?
8 A. Yes. We have had ongoing
9 discussions back and forth as to the
2 o acceptability of certain terms.
D.1 Renegotiation of certain terms. The
D. 2 inclusion of additional terms.
D. 3 (Whereupon, the E-mail dated
D.4 August 26, 2010, was marked as Semon
~ 5 Exhibit 4 for identification as of
Page 104
1 K. SEMON
2 A. Based on the negotiations so
3 far, we have made another draft of the case
4 which incorporates the plan terms as of last
5 night.
6 (Whereupon, the case
7 presentation was marked as Semon
8 Exhibit 5 for identification as of
9 this date by the Reporter.)
o Q. I am handing you what has been
1 marked as Exhibit 5. What is that?
2 A. This is the latest case
3 presentation. It has been updated with --
4 subject to the terms as of the last
5 discussions with Five Mile. This case has
6 yet to be reviewed or approved by Midland's
7 credit review committee, Five Mile in their
8 capacity as controlling class representative
9 or Presidio in their role as controlling
~ o class representative.
P.1 Q. And when was Exhibit 5 created?
D.2 Or that version?
Q3 A. This version, late Thursday,
!24 September-- sorry, August 27th. 26th.
i2 5 Q. Do you know if there were any
Page 103
1 K. SEMON
I 2 this date by the Reporter.)
3 Q. I am handing you what has been
4 marked as Exhibit 4. Can you identify that
5 document, please?
6 A. Yes. It is actually an E-mail
7 received from legal counsel for Five Mile.
8 It is directly addressed to our counsel here
9 at the Haynes & Boone firm, and it is taking
0 the write-up case, making some changes and
1 recommendations as negotiation has
~ 2 progressed.
Y, 3 This is as of August 23rd --
f 4 26th, which is four days after the approval
5 case was originally submitted.
6 Q. That was yesterday?
7 A. Yes.
8 Q. Is the -- excuse me.
9 Does Exhibit 4 also include the
P 0 case that you had--
P 1 A. Yes. It takes the case
f 2 presented and blacklines it for some
f 3 recommended changes.
!2 4 Q. Has the case, as you have
5 described it, been finalized?
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K. SEMON
revisions to Exhibit 5 today?
Page 105
A. I am not aware of any subsequent
changes today.
Q. Has Midland provided any
comments or suggested changes to the, what
has been referred to as Five Mile commitment
letter?
A. Yes, we have.
Q. And when were those comments and
suggestions made and transmitted to Five
Mile?
A. I believe the last draft was
completed end of business yesterday and
forwarded to them at the same time.
(Whereupon, the draft of the
Five Mile commitment letter was marked
as Semon Exhibit 6 for identification
as of this date by the Reporter.)
Q. I am handing you what has been
marked as Exhibit 6. Would that be the last
draft of which you refer?
A. Yes, dated August 27th.
Q. You had mentioned in answers to
Mr. Donovan's testimony that the discussions
27 (Pages 102 to 105)
Page 1061
1 K. SEMON
2 were ongoing; is that correct?
3 A. That's correct.
4 MR. DONOVAN: Objection to form.
5 Q. What is the current status of
6 the discussions with respect to the
7 commitment letter from Five Mile?
8 A. We have tendered what we believe
9 is our most recent changes awaiting final
0 acceptance from them. But we have no
1 further comments to add or ask at this time.
2 Q. What is the current status of
3 the drafting and approval process of the
4 case, as you described it?
5 A. At this time, we believe it is
6 in format ready for resubmission for our
7 credit committee and to the controlling
8 class representatives.
9 Q. Why is it submitted to the
0 controlling class representatives?
1 A. In their role as advisors under
2 the trust.
3 Q. Is that process customary for
Midland?
2 5 A. Yes, it is. It is a standard
Page 108
1 K. SEMON
2 Five Mile, correct?
3 A. No. But it is pending approval
4 at this time.
5 MR. PENN: Excuse me. I think
6 you built in a double negative.
7 Hasn't and no, instead of--
8 Q. I will reask it, Mr. Semon.
9 Exhibit 5, you said it is under
o consideration, but the proposal contained in
1 Semon Exhibit 5 has not been approved by
2 Midland?
3 A. It has not yet been approved.
4 Q. And Exhibit 6, which is an
5 August 27, 2010, Five Mile commitment
6 letter, this has not been accepted by
7 Midland either, correct?
8 A. No. It would be subject to the
9 approval.
Q. Ifyou can put in front ofyou
Semon 3.
A. Gotit.
3 Q. Okay. And this is, I think, one
of the documents that was part of your
!:> 5 negotiations with Five Mile, correct?
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Page 107
K. SEMON
requirement pursuant to the Pooling and
Servicing Agreement. They have a period of
days within which to review, approve and
consent to actions.
MR. PENN: I will pass the
witness.
EXAMINATION BY
MR. DONOVAN:
Q. Mr. Semon, do you have Semon
Exhibit 3 in front of you?
A. Yes, I do.
Q. The plan or arrangement
discussed in this memo was never executed,
correct?
A. Correct.
Q. Semon Exhibit 4, the plan and
proposal contained in Exhibit 4 has never
been executed by Midland, correct?
A. Number 4 is our internal
memorandum. It has not fully been approved
by our committee.
Q. Exhibit 5, which is entitled for
the multiple properties and the term sheet,
this hasn't been approved by Midland and
Page 109
K.SEMON
A. This would be an approval
request based on negotiations at a point in
time.
Q. Which of these documents, Semon
3, 4, 5 and 6 -- withdrawn.
You received a binding
commitment letter from Five Mile on
August 20th and another one on August 27th,
correct?
MR. PENN: Incorrect. Just for
clarification, Exhibit 6 was outbound
from Midland to Five Mile. Comments
back.
MR. DONOVAN: Withdrawn.
Q. I will ask you this way. You
received a letter from Five Mile dated
August 20, 2010, concerning the first
commitment letter?
A. Yes.
Q. You also received another
commitment letter from Five Mile dated
August 27th. That's Exhibit 6, correct?
A. I understand the letter dated
August 27th reflects the comments of the
28 (Pages 106 to 109)
Page 110
1 K. SEMON
2 lender as to Five Mile's form and their most
3 recent draft of their term letter.
4 Q. Well, Exhibit 6 is a letter on
5 Five Mile letterhead to yon, correct?
6 A. Correct.
7 Q. So -- and did you provide to
8 Innkeepers this August 27, 2010, letter you
9 received?
o A. No.
1 Q. Fair to say you have been having
2 negotiations with Five Mile regarding a
3 proposed plan for some time, correct?
4 A. Maybe a week.
5 Q. And during this time, you have
6 never picked up the phone and called
7 Mr. Beilinson to give him the details of the
8 terms of this plan that you are negotiating
9 with Five Mile, correct?
~ 0 A. Correct.
~ 1 Q. Let's go back to Semon 3,
~ 2 please.
~ 3 A. Okay.
~ 4 Q. These pages aren't Bates
D. 5 numbered so --
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K.SEMON
A. The document Page 7?
Q. Yes. Your approval memo,
Page 7. Seven of 13.
A. Yes.
Q. Are you there?
Page 112
Under "Sponsor Discussion," you
say, "Five Mile has already made available
subject to Court approval debtor in
possession financing to the company in
excess of $50 million. As a result, they
are familiar with the company's assets and
operating performance obtained from a review
of public filings and their own unassisted
due diligence."
Do you see that?
A. Yes.
Q. And why is it a benefit to have
a future equity owner be an entity that is
familiar with the company's assets?
A. They are better able to make a
value estimate of the collateral itself.
Q. Here you say, "Five Mile has
general expertise in the hospitality
market." Do you see that?
1
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A. They are. Upper left-hand
comer.
Page 111
MR. PENN: They are paged but
not Bates numbered.
Q. Well, page number. Let's go to
what you prepared, which is the third page
ofthis document, which has the picture of a
residence on the cover.
A. Yes.
Q. This is a report that contains
13 pages plus attachments, correct?
A. Yes.
Q. And this is a report that was
prepared by you?
A. Yes.
Q. And it is dated August 23, 2010,
correct?
A. Yes.
Q. And this Semon -- withdrawn.
This request for approval report
was provided to your internal credit review
committee, correct?
A. Correct.
Q. Turn to Page 7, please.
K. SEMON
A. Yes.
Q. "The extended-stay lodging
sector." Do you see that?
A. Yes.
Q. You believe those are both
Page 113
benefits to have a future equity owner that
has an expertise in the hospitality market
and the extended-stay lodging sector,
correct?
A. Yes.
Q. If you can turn to Page 9 of 13
of your memo.
A. Yes.
Q. On Page 9, going over to 10, you
provide the strengths and weaknesses
regarding accepting the Five Mile plan, the
competing plan, correct?
A. Yes.
Q. Let's go to Page 10. You say
one of the weaknesses is that an unknown
entity could be a successful overbid. Do
you see that?
A. Correct.
Q. Why is that a weakness?
29 (Pages 110 to 113)
Page 114 Page 115
1 K.SEMON 1 K.SEMON '
2 A. We don't know who they are. 2 A. Yes.
3 Most cases, we find that they are fully 3
Q. Can you summarize what this
4 experienced owners, operators, capital 4 alternative is?
5 partners, but there is a possibility, and it 5 A. It assumes at some time relief
6 is a risk with the market, of having an 6 is obtained from the bankruptcy estate, as
7 unknown entity being the successful bidder. 7
can occur. And in that situation, we would
8 It is a small risk, but it is a risk. 8 move for an appointment of a receiver. The
9 Q. It also provides one of the 9 properties would be marketed through a
0 weaknesses is, it is subject to an order 0 brokerage agent, widely marketed, and sold
1 terminating the borrower exclusivity period 1 to a new investor.
2 prior to October 15, 2010. Do you see that? 2 And then in this case, it
3 A. Yes.
p details what our assumptions were, included,
4 Q. Why is that a weakness?
t:
to determine what the cash flows might be
5 A. It is a time limitation. There estimated.
I
6 are limitations on this, the life of this

Q. And under the weaknesses, the
7 term letter. 7 first weakness says, the net present value
8 Q. The following pages, you discuss 8 is estimated at five, approximately
9 different alternatives to agreeing with the 9 508 million, utilizing the note rate for the
0 Five Mile plan, correct? 0 discount factor.
).1
A. Yes. 1 You then say if a more

Q. Let's look at alternative one, 2 conservative ten percent discount factor is

which is relief and sale through the 3 utilized, the net present value declines to

receivership of as-is collateral. Do you 4 approximately $491 million. Do you see
25 see that?
15
that?
I
Page 116 Page 117
1 K.SEMON 1 K.SEMON
2 A. Yes, I do. 2 Midland net present value calculations that
3 Q. What market discount factor did 3 generated the range of 600 to 650, what
4 you use to generate the $508 million? 4 discount factor did you use?
5 A. When servicing CMBS debt, we 5 A. Those would be utilizing a
6 service according to the Pooling and 6 market rate discount factor.
7 Servicing Agreement, and under that 7 Q. What rate did you use?
8 agreement, we utilized the note rate as the 8 A. I believe, if I -- the
9 discount rate. 9 assumptions I utilized would be detailed on
0 Now, in this case, the note rate 0 my page 17 of 13, and it basically states--
1 is 6.7125 percent, which would be a very 1 MR. PENN: I think Page 7 of 13.
2 aggressive discount rate for an investor in 2 You said 17.
3 the market. We believe an investor in the 3 A. Oh, 7 of13.
4 market would be utilizing, say, a ten 4 Q. Can you show me where you have
5 percent discount factor, because there is 5 your discount rate?
6 risk associated with a portfolio such as 6 A. Right under the definition of
7 this.

collateral valuations, special servicer's
8 Therefore, what we want to show opinion of value, the first sentence states
i
9 is the net present value if we utilize the 119 that applying a ten percent capitalization
trust's viewpoint as to discounted cash po rate, and then further down below,
).1
flows. But we also wanted to make them
n
additional assumptions include a 12 percent
aware that the net present value would be discount factor. So in this situation
potentially less if you looked at it in the 12 percent is utilized.
viewpoint of the market.
fi
Q. Now, in your growth rates on
/.5
Q. In generating your internal projections below, you have a growth rate
-c <, ; 'A;.; _,;, ,; _.< "<o .;. .. 0:-<:w.. ,,_.;., ;;<,_.-.,.<, . (. .. "'"' -< "'"' '""'
30 (Pages 114 to 117)
Page
1 K. SEMON
2 for 2011 of 12 percent. Do you see that?
3 A. Yes.
4 Q. Is that an assumption that--
5 well, tell me what that is, what is that
6 12 percent reflecting?
7 A. It is saying that was generally
8 going to grow by 12 percent over the prior
9 year.
0 Q. So it is your belief that
1 Innkeepers' net operating income will
2 increase from 2010 to 2011 by 12 percent?
3 A. Yes. We believe there is going
4 to be an upside in the market. And this is
5 after reviewing published reports, including
6 those from PKF Hospitality.
7 Q. You believe the net operating
8 income is going to increase from 2011 to
9 2012 by five percent?
A. Yes.

Q. And then it is going to jump
from 2012 to 2013 by 10 percent, correct?
D3
A. Yes.
D4
Q. And then thereafter, you have a
three percent growth rate, right?
Page
1 K.SEMON
2 special servicer believes that it is highly
3 unlikely that the Court would be willing to
4 immediately entertain a motion for relief
5 from stay until the borrower has an
6 opportunity to file a plan."
7 Do you see that?
8 A. Yes.
9 Q. And that's your belief, correct?
0 A. Yes.
1 Q. You were asked some questions on
2 redirect by Mr. Penn regarding fair,
3 equitable and market. I think you said
4 that's the way you envision the market
5 valuation. True?
6 A. Yes.
7 Q. Is it your understanding that it
8 is legally required in a Chapter 11
9 proceeding for a company to market in the
20 way you would like to see it?
23 A. I am not aware of what the
b24 Bankruptcy Code or requirements are.
Q. But is it your understanding
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Page 119
K. SEMON
A. Yes. Those are the assumptions
that we used at the time. Based on finding
additional information, indices, we changed
our opinions. Just like the market changes,
our opinions can change as well.
Q. As those opinions and inputs
change, the total valuation can change,
correct?
A. Correct.
Q. Let's go to Exhibit 4, please.
Specifically, page 13 of 14 of your
memorandum.
A. Okay.
Q. Under alternative one, you
have -- this is again the relief and sale
through receivership of as-is collateral.
Do you see that, as alternative one?
A. Yes.
Q. And again, this is where the
special servicer would seek leave from the
Court to take its collateral under the
fixed-rate pool and then sell it?
A. Correct.
Q. In this memo it states, "The
K.SEMON
that a market process as you envision is
required for a Chapter 11 proceeding?
a legal conclusion.
A. Again, I don't know what the
requirements are.
Q. Thank you very much. At this
time we would ask that you attend the
hearing on September 1st. And I will let
your counsel know if we don't need you
there.
A. Okay.
Q. Thank you.
(Whereupon, at 12:18 p.m., the
Examination of this Witness was
concluded.)
KEVIN SEMON
Subscribed and sworn to before me
this __ day of , 2010.
NOTARY PUBLIC
Page 121
31 (Pages 118 to 121)
Page 122 I
1 1
2 EXHIBITS
2
3 3
4 SEMON EXHIBITS:
4
5
5
6 EXHIBIT EXHIBIT PAGE
6
7 NUMBER DESCRIPTION
7
8
8
9 ' 9
0 Exhibit 1 August 20, 2010, letter 85
10
1 from Five Mile to Midland
11
2 Exhibit 2 Deposition Notice 98
12
3 Exhibit 3 E-mail dated August 23, 99
13
4 2010
14
5 Exhibit 4 E-mail dated August 26, 102
15
6 2010
16
7 Exhibit 5 Case presentation 104
17
8 Exhibit 6 Draft of the Five Mile 105
18
9 Commitment letter
19
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23
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Page 124
1
1
2 CERTIFICATE
2
3
3
4 STATE OF NEW YORK ) 4
: SS.:
5
5 COUNTY OF NASSAU )
6
7
6
7 I, REBECCA SCHAUMLOFFEL, a Notary 8
8 Public for and within the State ofNew York,
9 do hereby certify:
9
0 That the witness whose examination 10
1 is hereinbefore set forth was duly sworn and
11
2 that such examination is a true record of the
12
3 testimony given by that witness.
13
14
4 I further certify that I am not
5 related to any of the parties to this action
15
6 by blood or by marriage and that I am in no
16
17
7 way interested in the outcome of this matter.
8 IN WITNESS WHEREOF, I have hereunto 18
9 set my hand this 27th day of August, 2010.
20
19
)1
REBECCA SCHAUMLOFFEL
20
22 21
23
22
24
23
24
/5
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TSG Reporting - Worldwide 877-702-95 80
Page 123
INDEX
EXAMINATION BY
MR. DONOVAN
MR. PENN
PAGE
5, 107
95
INFORMATION AND/OR DOCUMENTS REQUESlED
INFORMATION AND/OR DOCUMENTS PAGE
(None)
QUESTIONS MARKED FOR RULINGS
PAGE LINE
(None)
Page 125
WITNESS ERRATA SHEET
Witness Name: Kevin Semon
Case Name: In Re: Innkeepers
Date Taken: August 27,2010
Page# __ Line#
--
Should Read:
Reason for Change:
Page# __ Line#
--
Should Read:
Reason for Change:
Page# __ Line# __
Should Read:
Reason for Change:
Page# __ Line#
--
Should Read:
Reason for Change:
Page# __ Line#
--
Should Read:
Reason for Change:
Witness Signature:
32 (Pages 122 to 125)
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1:4 99:12 Apollo (22) 100:7,8 41:20
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ALAN (1) 4:5 46:21 47:2,7,15 asset (6) August (33)
13:9
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57:7,9 62:13 64:8
3:4 49:25 50:10 54:23 assets (28) 75:12,20 77:8 85:20
77:5,6 91:16 102:14
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102:22 117:21
90:19 apologize (1) 22:23 29:13,15 102:24 103:13
119:4
allocated ( 4) 54:17 33:20 38:19,21 39:2 104:24 105:23
addressed (6)
83:7 90:15 92:9,12 Appaloosa (9) 39:3 41:5,7,15 108:15 109:9,9,18
56:14 99:12101:7,10
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101:13 103:8
91:15 28:21 30:15,18,23 43:21 51:19 56:9 111:17 122:10,13
administered (1)
allocations (1) APPEARANCES (3) 66:17 69:13 97:5 122:15 124:19
20:20
74:20 2:2 3:2 4:2 112:12,20 125:3
advisable (1)
Almond (2) appears (4) assign (1) AUSTIN (1)
31:22
75:9 101:8 92:23 94:5,7 101:22 46:12 3:22
advise (1)
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Page 2
12:10 9:21 23:21,21 30:4 52:11 81:10 41:22
automatic (1) Bates (2) bid (I) Brothers-UBS (1) cap (I)
32:23 110:24 Ill :5 44:10 27:11 17:7
available (3) behalf(3) bidder (1) Brothstein@paulw ... capable (2)
33:9 94:22 112:8 57:24 67:9,16 114:7 4:8 35:24 36:13
Avenue (6) Beilinson (14) bidding (3) brought (5) capacity (1)
1:13 2:23 3:5,11,23 20:11,16,22 21:5,20 44:6 77:15,21 55:17 62:17 92:18 104:18
4:7 24:15 57:23 64:24 bifurcation (1) 98:15,25 capital (14)
awaiting (1) 66:22 67:8 69:21 74:22 BRYAN (1) 2:16 3:16 29:25 32:18
106:9 72:4,12110:17 binding (3) 2:22 33:21 34:12 64:4
aware (30) Beilinson's (1) 71:2 73:14 109:7 budget (2) 81:9 86:4 93:18
7:19 8:22 9:4 12:3 62:10 bit (1) 23:22 90:20 96:5,7 101:9 114:4
27:15 28:4,6 30:21 belief (2) 23:6 built (1) capitalization (1)
32:15 35:9,21 40:21 118:10120:9 blacklines (I) 108:6 117:19
41:22 52:17,21 believe (53) 103:22 bulk (1) caps (2)
69:24 72:21 78:7 35:23 36:12 37:3,10 Blackstone (1) 38:21 88:14 90:4
80:2 84:4,8,14,21 37:12,18 41:14,24 72:14 business (6) care (2)
85:4,5,10,14 105:3 44:20,23 45:14 blood (1) 5:21 9:8 16:5 59:7 54:5 66:18
116:22 120:23 47:19 50:22 51:15 124:16 72:2 105:14 Carolyn (1)
a.m (1) 53:11,15,20 54:8,12 blue (1) businesses (1) 57:21
1:8 55:21 59:22,24 60:3 74:2 9:9 case (21)
61:3 64:20,25 67:11 bondholders (1) Busy (1) 5:24 12:15,16,20
B
68:18 69:10,14 70:5 31:4 11:9 42:19 102:6,10
B (10) 71:10,24 73:5,5,8 bonds (3) I 03: I 0, 15,20,21,24
88:25 89:4,9,11,18 75:9,25 81:19 89:2 27:22 28:8 29:10
c
104:3,6,12,15
90:24 91:12,17,18 90:21 94:22 97:15 Boone (5) c (2) 106:14 115:12
122:2 98:5 100:6 105:13 1:13 2:11 57:21,22 124:2,2 116:10 122:17
back (9) 106:8,15 113:6 103:9 calculated (2) 125:2
9:1129:17 30:14 53:3 116:13117:8 borrower (27) 8:4,6 cases (4)
69:2 102:17,19 118:13,17
14:22 20:9 21:11 calculating (2) 43:23 71:24 72:3
109:14110:21 believed (1)
42:13 50:1952:9 10:23 11:16 114:3
background (1) 42:15 56:12 57:3,8,11,16 calculation (1) cash (33)
76:11 believes (4)
58:17 59:6 60:15 9:13 7:25 9:13 10:22 20:20
bad (1) 28:7 36:23 51:21 61:10,17 62:20 63:4 calculations (11) 20:2121:2436:6,7
23:6 120:2 63:12,25 64:8 65:10 8:2,20,21 9:12 11:12 52:10,14 56:8 62:14
balance (3) BEN (1) 65:12 66:16,19 11:17,20 13:10 63:6,10,13,22 66:6
80:21 93:5 94:6 4:8 114:11 120:5 16:19 102:9117:2 79:15,18,22,23 80:4
Bank (5) beneficial ( 1) borrowers (2) California (1) 80:5 82:10 83:9,14
72:15 81:9,10,12,13 42:15 21:14 59,:9 81:17 84:7,17 91:14,22,23
bankruptcy (17) beneficiary (1) borrowing (4) call (4) 115:14 116:20
1:2 43:2,5,7,13,15,17 47:11 52:17 58:22 82:12,18 24:15 37:22 43:22 cause (1)
48:5,17,22 49:7 benefit (6) break (3) 81:20 40:11
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52:15 53:4 74:15 47:24 49:10 53:12,22 44:13 78:6 94:25 called (11) CAVE (1)
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bar (4) benefited (1) 77:10,13,14 33:8 52:16 59:23 CDs (1)
11:10 100:2,24 101:5 47:13 brief (1) 76:2 80:4 102:7 24:5
based (23) benefits ( 4) 6:21 II 0:16 cell (1)
7:24 10:9 12:9 26:7 37:13 38:8 53:16 briefs (1) calls (31) 20:13
35:22 43:12 46:6,16 113:7 40:20 14:4 15:23 17:20 32:4 Center (1)
48:21 49:5,10 51:8 BENSON (1) Broadway (1) 35:25 36:17 45:4,12 64:17
52:8 67:14 68:25 2:17 2:18 45:25 46:13 48:23 certain (7)
78:2 89:3 90:12 best (11) broken (1) 49:13 50:5,6,12,13 25:24 31:21 76:22
92:5 101:21 104:2 41:14 46:18 49:14 89:3 52:19 53:5 54:18 93:19,19 102:20,21
109:3 119:3 58:5 59:18 78:9 brokerage (3) 55:13 56:2 67:18 Certainly (2)
basically (7) 89:24 91:3,25 92:15 15:15 41:20 115:10 68:21,25 71:18 61:13 81:8
23:18 53:21 76:14 94:2 brokers (4) 79:10 82:13 83:11 certificate (13)
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117:10 51:19 112:21 Brothers (1) campaign (1) 27:16 29:8,22 30:5
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Page 3
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124:9,14 36:24 37:6,15 44:2 communications (4) 34:17 58:14,15,19,25 106:17,20
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38:18 52:4,13,25 53:7,8 companies (4) confirmation (1) 21:4,9 26:7
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25:4 98:16 64:5 68:20 76:12,13 83:23 Connecticut (1) 99:21
change (10) 78:19 79:3,8 80:5 company (2) 24:25 conveyed (2)
59:14 90:8 119:6,8,8 93:5 96:20,21,24 112:10 120:19 consent (1) 19:24 71:2
125:6,9,13, 16,19 97:9 112:22 114:24 company's (3) 107:5 cooperative (1)
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119:4 collected (1) compare (1) 115:22 copy (8)
changes (8) 80:22 94:14 consider (4) 34:6 35:7 58:18,20
77:5,7 103:10,23 collection (1) comparison (1) 40:25 44:9 57:5 87:11 59:20 98:10,24
105:4,6 106:9 119:5 33:22 23:22 consideration (1) 101:18
channels (2) collections (1) compensating (2) 108:10 corner (1)
32:21 41:19 80:23 42:14,17 consistent (2) 111:3
Chapman (1) Collin (2) compensation (2) 69:11 99:20 Corp (1)
94:17 99:12 101:9 77:19 80:11 consolidated (7) 48:21
Chapter (2) column (1) competing (5) 50:21 52:3 82:10,24 Corporation (3)
120:18 121:3 94:5 44:8,10 72:9 101:20 83:9 84:7,17 4:5 48:15 49:9
charge (1) come (7) 113:18 consolidation (5) correct (91)
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charged (1) 45:16 74:2 96:5 34:18 36:21 65:10 constant (1) 18:20 22:2 25:25
29:14 comes (1) completed (5) 72:17 26:24,25 31:16,17
chart (1) 54:21 7:9,13 32:14,15 consult (1) 32:6 38:6,7 41:11
92:10 comfortable (1) 105:14 11:14 47:21 49:22,23 50:4
charts (1) 26:12 completely (1) consultant (1) 50:8 51:24 52:18
94:5 coming (1) 58:16 18:10 54:4 55:3,4,7,18,19
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95:14 commence (1) 36:25 7:13,15 8:5 63:17 65:23 66:6,7
circumstances (2) 21:24 concept (1) contact (6) 67:7,20 69:9,19
42:8 60:23 comment (5) 92:8 20:9,10,12 35:11 72:6 73:16 75:22 77:10
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57:16 61:10 53:19 84:13 50:15 56:11 contacted (3) 83:2,25 84:8 85:3
claiming (2) commentary (1) concerning (1) 21:22 72:8 85:15 85:13 86:8,12 88:16
27:21 58:23 33:17 109:18 contacting (1) 88:19 91:18,19,23
clarification (4) comments (6) concerns (2) 72:14 91:24 98:3 106:2,3
63:24 64:7 93:10 102:16 105:6,10 49:16 56:6 contain (1) 107:15,16,19 108:2
109:12 106:11 109:13,25 concluded (1) 23:24 108:17,25 109:10
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14:16 13:6 44:10 70:24 71:3 conclusion (18) 17:12 75:12 107:18 110:19,20111:12
clarifying (1) 72:22 73:3,15,25 6:11 7:8 17:21 32:5 108:10 111:18,23,24
95:6 75:20 77:9 78:25 43:16 45:5,13 46:2 containing (1) 113:10,18,24
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29: I 0,23 30:7 40:8 105:7,17 106:7 50:7,14 55:14 66:15 contains (1) 119:9,10,24 120:9
101:11 104:18,20 108:15 109:8,19,22 78:9 120:22121:5 Ill: II
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clear (1) committee (20) 64:5 66:5 39:21
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39:16 58:3 64:2,16
46:20,20 65:24 35:2,7 76:3,18 77:4 conduct (3) Continued (2)
65:3 74:12 82:4,7
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103:7,8 121:11
18:11 26:23 35:17 104:17 106:17 conducted (1) continues (1)
counsel's (2)
88:14 90:4 91:10 107:22 Ill :23
31:6 82:11
66:11 67:24
92:22 116:5 commonality (1) conducting (1) continuing (1)
COUNTY (1)
Code (1) 56:23 31:19 83:9
124:5
120:24
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82:5
communication (1) course (3)
Page 4
59:6 71:25 74:11 2:6 86:2 98:14,18 100:12 115:20,22 116:3,9,12 122:18
court (9) deal (1) 100:16,19 122:12 116:15 117:4,6,15 drafting (1)
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120:3 27:681:23 92:19 116:20 73:2,17
court-appointed (1) debt (30) described (4) discuss (9) due (3)
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36:7 56:5 111 :9 74:22 86:18,20,24 DESCRIPTION (1) 114:18 5:3 124: II
create (1) 87:6,10,11,12,15,21 122:7 discussed (11) duties (2)
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38:21,25 104:21 93:23 94:8,10,11 details (3) 66:9 67:21,23 70:14 25:23 31:5,19
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104:17 106:17 93:3 112:9 9:22 42:9 51:13 discussion (7) E (6)
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CRISP (1) DECHERT(1) determines (3) 27:25 39:17 40:2 61:5 34:11 35:4 63:25
3:18 3:5 45:8,22 46:9 61:1162:9,15 67:3 70:14 75:24 81:19
Crossing (1) decision (2) determining (3) 68:5 69:19 82:6 early (1)
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24:16
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108:17
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96:19 58:21 fact (9) filings (1) 108:2,15,25 109:8
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90:14 97:2 99:4,7 102:11,25 115:20,22 116:3,15 finalized (1) 118:19 122:11,18
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9:8 13:20 23:3 44:7 104:21 105:2,18,21 factors (2) finally (1) 17:12
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estimate (1) 108:9,11,14 109:12 failed (3) financial (8) 5:25 6:5,9 7:4 8:9,23
112:22 109:23 110:4 65:10,12,18 13:22 22:25 23:5,8,15 11:413:1114:11
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96:4 115:15,18
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evaluated (1) existing (1) 63:11,18 65:21 67:5 financing (3) 26:14 29:21 30:11
6:11 90:8 69:17 70:7,25 73:13 46:24 84:12 112:10
32:19 33:20 35:12
eventually (1) exits (1) 75:11,18 96:14 find (6) 35:23 36:22 37:6,13
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37:23 38:5,10 39:23
ever-evolving (1) expected (1) fairly (1) 65:13 91:6 114:3
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25:19 10:15 79:12 finding (1)
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evidence (9) expenditure (1) familiar (6) 119:3
53:2,1154:3,10
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55:11,24 65:22
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68:11,20 79:17,18
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