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 Citigroup Inc.'s (NYSE:C) headaches got worse Tuesday when Red Roof Inns Inc. defaulted on $361.4 million of mortgage debt. The default includes four loans including a $181.75 million loan and others valued at $76.6 million, $67.6 million and $34.4 million, according to Bloomberg. The collateral includes 113 Red Roof locations.Only two years ago, Citi's Global Special Situations Group and Westbridge Hospitality Fund LP bought the motel chain operator for $1.32 billion from Accor SA. (The Deal Pipeline subscribers can read the story here.) At the time, Citi and Westbridge paid 11.2 times the chain's 2006 earnings before interest tax, depreciation and rent of $118 million. The deal allowed Red Roof to cut its debt load by $1.1 billion. Citi holds a 79% stake in the chain. Red Roof's current debt load stands at $1.2 billion. The default continues Citi's ill luck when it comes to motel chains, as the bank played a key role in the $8 billion sale of Extended Stay Inc. to Lightstone Group LLC in April 2007. Last week, the motel chain filed for Chapter 11. (The Deal Pipeline subscribers can see the full story here.) David Elman wrote in Dealscape: When private real estate company Lightstone Group LLC announced in April 2007 it would purchase the hotel company for some $8 billion from Blackstone Group LP (NYSE:BX), Lightstone chairman and CEO David Lichtenstein was eager to talk about the deal. Lichtenstein told The Deal that Citigroup Private Bank sold him on the transaction in a bit of synergistic dealmaking. The Citigroup branch set up a meeting between Lichtenstein, a customer of the private bank, and its real estate investment bank, where Lichtenstein saw an Extended Stay proposal. He then hired Citi as financial adviser. "Citibank came up with an idea, and poof, it was a fabulous dish," Lichtenstein said. - George White See Bloomberg story on default See The Deal Pipeline story Extended Stay bankruptcy See The Deal Pipeline story on Red Roof sale See Dealscape post on Extended Stay
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