Lodging Enterprises: $91M Credit-Bid Liquidation of 44-Hotel Portfolio

Lodging Enterprises, LLC, operator of 44 Wyndham-branded hotels and 27 restaurants across 23 states, filed chapter 11 in the U.S. Bankruptcy Court for the District of Kansas on June 26, 2024 after disputes with its prepetition secured lenders left the company without access to operating funds. The case converted from an operating chapter 11 into a liquidation after equity holders failed to secure capital for a reorganization, and the debtor pivoted to a court-supervised sale process that produced a $91 million credit bid by the prepetition secured parties. The court confirmed an amended liquidation plan on November 21, 2025, and the plan went effective three days later.

A settlement between the debtor and its secured lenders preserved a dedicated recovery pool for general unsecured creditors that the debtor estimated would pay those claims in full.

Debtor(s)	Lodging Enterprises, LLC
Court	U.S. Bankruptcy Court, District of Kansas (Topeka Division)
Case Number	24-40423
Petition Date	June 26, 2024
Judge	Hon. Dale L. Somers
Confirmation Date	November 21, 2025
Plan Administrator	Bryan M. Gaston

Specialized Hospitality Operator and Lender Dispute

Lodging Enterprises described itself in the cash collateral motion as a crew-accommodation and hospitality platform serving transportation, construction, and resource-sector workers. The company's properties featured proprietary "dark-and-quiet" construction designed for workers needing uninterrupted rest, including sound-dampening materials, blackout drapes, and individual HVAC units. Railroad-related contracts generated more than 50% of revenue, making the portfolio heavily dependent on infrastructure-sector demand. At the petition date, the debtor employed more than 900 hospitality professionals through non-debtor affiliate Avantic Lodging Enterprises, Inc.

The company's sole member, VCM Lodging Enterprises, LP, acquired the equity interests in 2019 using proceeds from a $145 million loan originally made by UBS AG and subsequently held through a CMBS structure. The lender structure ran through UBS Commercial Mortgage Trust 2019-C18, with Wilmington Trust, National Association as trustee and Rialto Capital Advisors, LLC as special servicer. As of the petition date, Lodging Enterprises owed approximately $127.6 million under that loan agreement.

Default cascade. On April 24, 2024, Rialto sent a notice of default alleging that Lodging Enterprises had diverted approximately $13.26 million from local hotel depository accounts away from the lender-controlled cash management system. The debtor disputed the allegations, arguing that the special servicer was improperly characterizing employee tips and sales taxes as diverted rents and that legitimate operating expenses fell within a gap in the cash management agreement.

Rialto sent a second notice of default on May 31, 2024, claiming the debtor's audited financials reflected approximately $118.7 million in unpermitted debt from affiliate loans and more than $101.8 million in prohibited advances to affiliates. The debtor characterized these entries as a treasury management strategy and reimbursement of management expenses, but the special servicer also alleged financial-reporting defaults and SPE covenant breaches tied to the affiliate transactions. Despite corrective proposals and offers to grant additional security interests, negotiations reached an impasse.

On June 18, 2024, the debtor proposed a forbearance offering to engage a national broker to liquidate the portfolio in exchange for access to liquidity. The prepetition secured parties rejected the proposal and informed the company they would not release funds to cover July operating expenses, including a July 2 payroll deadline. The debtor warned that without access to cash it would have to shut down all 44 hotels and 27 restaurants, jeopardizing more than 900 jobs and disrupting the railroad contracts that anchored the revenue base. With no funds to pay personnel or sustain operations, Lodging Enterprises filed for chapter 11 protection.

Cash Collateral and Early Case Administration

The court entered an interim cash collateral order on July 2, 2024, six days after the petition. The case proceeded through multiple interim extensions of cash collateral authority, with the confirmed plan ultimately defining the operative order as the sixth interim cash collateral order.

The U.S. Trustee appointed an official committee of unsecured creditors on July 17, 2024. Greenberg Traurig, LLP served as counsel to the committee, with Spencer Fane LLP as local counsel. The court approved the retention of Kroll Restructuring Administration LLC as claims, noticing, and solicitation agent.

The debtor retained Hunton Andrews Kurth LLP as lead bankruptcy counsel, with Seigfreid & Bingham, P.C. as local counsel. Ankura Consulting Group served as financial advisor, with Bryan M. Gaston as the responsible professional.

CRO retention and disinterestedness dispute. On July 26, 2024, the debtor filed an application to employ 12588391 Canada Inc. — an entity associated with Tom Wenner, a former Lodging Enterprises vice president — as chief restructuring officer. The U.S. Trustee objected, arguing that Wenner's prior employment with the debtor made him not "disinterested" within the meaning of section 327(a) of the Bankruptcy Code. After an evidentiary hearing at which Wenner testified, Judge Somers issued a memorandum opinion on September 17, 2024 overruling the objection and approving the retention. The court applied a liberal construction of section 1107(b), concluding that Wenner's operational expertise was essential to the debtor's restructuring efforts despite his prior officer status.

Section 345(b) deposit compliance. The case also produced a published opinion on bank-deposit requirements. On September 18, 2024, Judge Somers issued a memorandum opinion denying the debtor's motion for a permanent waiver of compliance with 11 U.S.C. section 345(b), which requires collateralization or bonding of estate deposits exceeding the FDIC insurance limit. The court ordered the debtor to pursue surety bonds for its cash management and operating accounts. Compliance proved difficult in practice: subsequent hearings tracked the debtor's efforts to open compliant accounts with Wells Fargo and transfer funds, with the matter continuing on the docket into early 2025.

Pivot to Sale Process

The debtor initially explored a reorganization centered on reinstating the prepetition loan and pursuing litigation against the secured parties. Extended negotiations over an out-of-court settlement would have required the equity holders to raise capital to pay down a portion of the debt and ensure adequate post-restructuring capitalization. When equity holders were unable to obtain a binding commitment for additional capital on acceptable terms, the company shifted to an asset sale strategy.

The debtor filed a bid procedures motion in March 2025, describing the portfolio then being marketed as 40 hotels and 27 restaurants. The sale process was tied to a settlement with the prepetition secured parties under which proceeds would first cover allowed administrative expenses, priority claims, and other secured claims, with the remaining proceeds split 10% to allowed general unsecured claims and 90% to the secured parties.

The unsecured creditors' committee and the U.S. Trustee both filed objections to the bid procedures and the related settlement motion. The committee's objection sought modifications to the bid procedures order and the proposed settlement terms, while the U.S. Trustee objected to the settlement under Rule 9019. The court approved bid procedures on April 21, 2025, setting an August 14, 2025 bid deadline, an August 28, 2025 auction date, and a September 2, 2025 winning-bidder announcement deadline.

Prior dispositions. Before the portfolio sale, the debtor had already sold four underperforming properties: the Nashville hotel for $4.5 million in August 2024, and three additional properties in Arizona, North Dakota, and Missouri for an aggregate $4.48 million in January 2025.

AHIP Holdback Claim Dispute

American Hotel Income Properties REIT Inc. and its affiliate AHIP Cargo Enterprises LLC filed proofs of claim asserting a right to a $7 million holdback under a pre-petition purchase agreement. The debtor objected, arguing that Lodging Enterprises was not a party to the agreement establishing the holdback and that the claimants' recourse lay against other entities. The prepetition secured parties joined the debtor's position, and AHIP conducted discovery — including document production requests and a deposition subpoena directed at VCM Lodging Enterprises.

After a contested litigation track that spanned from September 2024 through early 2025, the court issued a memorandum opinion on April 7, 2025 sustaining the debtor's objections. Judge Somers found no legal basis for AHIP to recover the holdback funds from the debtor's estate because the debtor was not a party to the purchase agreement that created the holdback obligation. The ruling cleared a potential $7 million administrative obstacle before the portfolio sale process began in earnest.

Marketing Campaign and Auction

The court approved CBRE's retention as real estate consultant and broker for the portfolio sale on May 14, 2025. CBRE's marketing campaign included a 96-page offering memorandum, site visits to representative properties, and a virtual data room with more than 2,300 files. The outreach reached over 15,152 potential bidders, and 323 executed non-disclosure agreements. The response drew interest from all 50 U.S. states and from Canada, South America, Europe, Asia, and Africa.

Ten parties submitted eleven purchase and sale agreements before the auction — seven for the entire portfolio and four for partial portfolios. Five full-portfolio bids qualified for the September 25, 2025 auction, and all five qualified bidders attended. After multiple rounds of bidding, the prepetition secured parties submitted the winning bid: a section 363(k) credit bid of $91 million. American Hotel Income Properties REIT Inc. submitted the back-up bid of $86 million in cash. The secured parties' outstanding claim was estimated at approximately $113.2 million, meaning the credit bid left a deficiency of roughly $22 million that the secured parties absorbed.

The court approved the sale of substantially all assets on October 21, 2025. Three Wyndham franchise entities — Travelodge Hotels, Inc., Super 8 Worldwide, Inc., and Baymont Franchise Systems, Inc. — had filed a limited objection to the debtor's assumption and assignment of franchise agreements, but withdrew the objection on the eve of the sale hearing.

Portfolio Sale Settlement

The Portfolio Sale Settlement Agreement, approved by the court on April 21, 2025 alongside the bid procedures order, resolved disputes between the debtor and the prepetition secured parties regarding the validity of the alleged defaults and associated default interest.

Under the settlement, the secured parties agreed to consent to the use of cash collateral through the end of 2025 under a budget sufficient for a marketing process. The lenders also agreed to share a portion of sale proceeds with other creditors through a "Claims Payment" mechanism, providing for distribution in order of: allowed priority claims, allowed administrative expense claims, other allowed secured claims, and 10% of remaining proceeds to allowed general unsecured claims.

The settlement addressed concerns raised by the unsecured creditors' committee by preserving the committee's right to challenge the secured parties' lien rights if the 10% distribution proved insufficient to pay at least $5.24 million or the total amount of allowed unsecured claims, whichever was less. The confirmation order later memorialized these settlement terms as part of the operative plan framework.

Liquidation Plan and Creditor Treatment

The debtor filed a disclosure statement on September 11, 2025, then filed an amended liquidation plan and amended disclosure statement on October 16, 2025. The court confirmed the amended plan on November 21, 2025 and the plan became effective on November 24, 2025.

The plan classified claims into five classes:

Class 1 — Other Priority Claims	Unimpaired; paid in full in cash on the effective date
Class 2 — Other Secured Claims	Unimpaired; paid in full or collateral returned
Class 3 — Prepetition Secured Parties	Impaired; claim reduced by $91 million credit bid; residual cash after all other distributions
Class 4 — General Unsecured Claims	Impaired; pro rata share from General Unsecured Claim Reserve Account
Class 5 — Equity Interests	Impaired; cancelled and extinguished with no distribution

Classes 3 and 4 voted to accept the plan. Class 5 equity interests were deemed to reject.

The amended disclosure statement included a liquidation analysis showing that general unsecured creditors would receive 0% recovery in a hypothetical chapter 7 liquidation versus 100% recovery under the plan, because a chapter 7 trustee would not have the benefit of the Portfolio Sale Settlement Agreement. The prepetition secured parties would face a deficiency claim of $21.1 million to $22.8 million in chapter 7, receiving only 27.5% to 32.7% of their secured claim rather than full credit-bid satisfaction under the plan.

Plan administration. Bryan M. Gaston, who had served as the responsible professional at Ankura Consulting Group during the case, became plan administrator on the effective date. The plan established three segregated accounts: a Professional Fee Escrow Account, a General Unsecured Claim Reserve Account, and a Wind-Down Account. All remaining assets, including retained causes of action, vested in the post-effective-date debtor for administration by the plan administrator. The plan administrator filed a notice of the effective date on November 24, 2025 establishing administrative claims, professional fee, and rejection damages bar dates.

Professional Fees and Post-Confirmation Activity

Fee orders entered in January 2026 reflect the administrative costs of the case. The court awarded Ankura Consulting Group $1,244,190.40 in fees and $2,900.28 in expenses for work from July 2024 through October 2025. Teneo Capital LLP, which took over the financial-advisor role after Gaston left Ankura, received $117,700.00 in fees for work from October through November 2025. The chief restructuring officer received $463,387.00 in compensation and $6,562.23 in expenses. Allen, Gibbs & Houlik, the debtor's accountants, received $39,169.00 in fees and $1,286.80 in expenses.

Claims reconciliation. As of February 2026, the case remained open for post-confirmation claims administration. The plan's original 90-day claim-objection deadline was extended to April 24, 2026 because the plan administrator was still reviewing the debtor's books and records.

Key Timeline

June 26, 2024	Lodging Enterprises files chapter 11 and seeks authority to use cash collateral
July 2, 2024	Court enters interim cash collateral order
July 17, 2024	U.S. Trustee appoints official committee of unsecured creditors
September 17, 2024	Court approves CRO retention over U.S. Trustee objection
September 18, 2024	Court denies permanent 345(b) waiver; orders surety bonds
April 7, 2025	Court sustains debtor's objection to AHIP's $7 million holdback claims
April 21, 2025	Court approves bid procedures and portfolio sale settlement
September 25, 2025	Auction produces $91 million credit bid by prepetition secured parties
October 21, 2025	Court approves sale of substantially all assets
November 21, 2025	Court confirms amended liquidation plan
November 24, 2025	Plan effective date; Bryan M. Gaston becomes plan administrator
February 20, 2026	Court extends claim-objection deadline to April 24, 2026

Frequently Asked Questions

What happened to Lodging Enterprises?

Lodging Enterprises filed chapter 11 on June 26, 2024 after disputes with its prepetition secured lenders cut off access to operating funds. The case evolved from an operating chapter 11 into a liquidation, with the debtor's 44 hotels and 27 restaurants sold through a court-supervised auction. The prepetition secured parties acquired the portfolio through a $91 million credit bid, and the court confirmed a liquidation plan on November 21, 2025.

Who acquired Lodging Enterprises' assets?

The prepetition secured parties — Wilmington Trust, National Association as trustee for UBS Commercial Mortgage Trust 2019-C18, acting through special servicer Rialto Capital Advisors, LLC — submitted the winning $91 million credit bid at the September 2025 auction. American Hotel Income Properties REIT Inc. was the back-up bidder at $86 million.

What do unsecured creditors receive under the Lodging Enterprises plan?

The amended liquidation plan provides for general unsecured claims to be paid from a dedicated reserve account funded through the Portfolio Sale Settlement Agreement. The disclosure statement's liquidation analysis estimated 100% recovery for unsecured creditors under the plan, compared to 0% in a hypothetical chapter 7 liquidation.

Who is the claims agent for Lodging Enterprises?

Kroll Restructuring Administration LLC serves as the claims, noticing, and solicitation agent.

For more bankruptcy case coverage, visit the ElevenFlo bankruptcy blog.