Madison 92nd Street Associates LLC is ready to exit bankruptcy after a contentious case that included the sale of its New York hotel.

Judge Stuart M. Bernstein of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan confirmed Madison 92nd Street's liquidating reorganization plan on May 17, a source close to the case said.

Bernstein on May 2 signed an order approving the sale of Madison 92nd Street's Upper East Side Courtyard by Marriott hotel to RLJ Lodging Acquisitions LLC for $82 million.

The sale is scheduled to close June 1, court documents said.

The source said Madison 92nd Street's plan will go into effect sometime before the sale closes.

According to a plan supplement, filed May 15, administrative claims totaling $3 million and secured mortgage lender GE Capital Corp. (owed $74.01 million on a $62 million promissory note issued May 12, 2008) will be paid in full in cash on the plan's effective date from the sale proceeds.

Holders of general unsecured claims (owed $1.39 million) as well as an unspecified amount of other unsecured claims will also receive up to 100% from the remaining sale proceeds.

Equity holders will receive a pro rata share of the sale proceeds after all other claims are paid in full.

Bernstein signed an order April 9 approving the company's disclosure statement.

RLJ is an affiliate of RLJ Lodging Trust, a REIT that owns more than 140 hotels in 20 states, its website said. The Bethesda, Md., company is publicly traded on the New York Stock Exchange.

A formal auction for Madison 92nd Street never took place.

According to court documents, five parties submitted written indications of interest for the hotel with bids ranging from $56 million to $77 million.

After deliberations with those parties, three investors were invited into a final round of bidding. The final round resulted in bid proposals of $74 million to $81.5 million.

GE Capital is the backup bidder with a credit bid of $74.01 million for the hotel, court documents show.

Madison 92nd Street's minority and majority equity group holders, which had been on opposite sides after the case commenced on Aug. 16, 2011, later agreed to support a sale.

Bernstein on Feb. 23 signed an order approving Madison 92nd Street's amended bidding procedures, which removed a previously named stalking-horse bidder.

Madison 92nd Street's minority equity holders on Jan. 6 had filed a bidding procedures motion that sought to name CIM Group Acquisitions LLC as lead bidder, with an $84.1 million offer. Because another potential bidder came forward, though, the auction proceeded without a stalking horse. The identity of the other bidder was never disclosed.

Madison 92nd Street's equity holders include 92nd St. Hotel Associates LLC (which holds a 50% interest), controlled by bankrupt Louis Taic; JKNY LLC (3.26%), owned by Jeffrey Kosow; bankrupt Robert Gladstone (32.18%); Lucille Gladstone (5%); Andrew Harris (1%); and John Lesher (8.57%).

Taic and Kosow filed a Chapter 11 petition for Madison 92nd Street on Aug. 16. Gladstone led the minority equity holders in the case.

Madison 92nd Street's equity holders were "at odds with each other" on the best way to reorganize the hotel, according to an Aug. 16 declaration filed by the majority equity holders. They expected the minority group to pursue a sale, which they termed "counterproductive" at the time.

Instead, the majority group said at the time it was working with Westport Capital Partners LLC to refinance GE Capital's claim.

Madison 92nd Street's hotel is at 410 E. 92nd St. near First Avenue in New York. The hotel has 226 rooms, including 16 suites, and opened in 2006. Courtyard Management Corp., a subsidiary of Marriott International Inc., manages the property.

The debtor listed $84.47 million in assets and $75.4 million in liabilities in schedules. Madison 92nd Street valued its hotel at $80 million. Its net operating income has averaged $310,000 per month in the past year.

J. Ted Donovan of Goldberg Weprin Finkel Goldstein LLP represents the majority equity holders.

Adam H. Friedman, Eric Goldberg and Fredrick J. Levy of Olshan Grundman Frome Rosenzweig & Wolosky LLP represent the minority group.

Cushman & Wakefield Sonnenblick-Goldman LLC is the hotel's financial adviser.

Michael C. Rupe and Heath D. Rosenblat of King & Spalding LLP counsel GE Capital.

William M. Goldman of DLA Piper US LLP represents CMC and Marriott.

Leah M. Eisenberg of Arent Fox LLP counsels RLJ.