Battling Over a New York Workout: The W Hotel Strategy

How did a mid-sized private equity firm win out over two deep-pocketed senior mezzanine lenders when a defaulted loan threatened to wipe out its investment?
Lynne Sagalyn, Fred Knapp '12  | Summer 2012
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On October 11, 2006, Istithmar, a subsidiary of Dubai World, the flagship investment company of the government of Dubai, purchased the 270-room W Hotel in Union Square from Related Companies for $285 million. LEM Capital, a mid-sized private equity firm, subsequently became a junior player in the stack of funders for the property. When Istithmar defaulted on its loan to its primary lender in 2009, LEM’s $20 million investment was at risk. This case asks students to review the actual loan and intercreditor agreements to determine what strategy might help LEM to preserve its investment.

Case ID: 121702
Supplemental Materials: Teaching Note, Teaching Slides , Loan Agreement Sample , Intercreditor Agreement Sample , Guaranty Agreement Sample

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