REPORT FROM THE U.S.—Extended Stay has filed a Chapter 11 reorganization plan with the U.S. Bankruptcy Court.
The plan calls for investment firms Centerbridge Partners and Paulson & Company to assume a 22.5-percent stake in the company for US$450 million. Another US$225 million could be raised through a rights offering, the company said in the 5 March filing. The cash infusion is necessary to pay off the company’s debt and invest in its assets, the company said.
Extended Stay, which is valued at between US$2.8 billion and US$3.6 billion, said it could exit bankruptcy in June.
Plan details
Holders of the company’s mortgage debt, which totals US$4.1 billion and was made into commercial mortgage-backed securities, would receive a 55-percent ownership position in the company and new mortgage notes valued at US$2.5 billion. The company also owes US$3.3 billion in mezzanine debt, which is not addressed in the bankruptcy.
Holders of general unsecured claims would receive cash payments of US$500,000, according to court papers.
Under terms of the plan, HVM Manager, an entity that manages the company’s hotels and is owned by David Lichtenstein—who is also CEO and founder of real estate investing company The Lightstone Group—would resign in exchange for a payment of US$30 million. If HVM does resign, a new, yet unnamed manager, would be appointed, court papers show.
A representative of Lightstone did not return a call for comment Monday evening.
Bankruptcy background
Spartanburg, South Carolina-based Extended Stay filed for bankruptcy on 15 June 2009, revealing the company had liabilities of US$7.6 billion as of 31 December 2008 and revenues of about US$1 billion.
A court-appointed examiner is expected to complete his investigation into the collapse of Extended Stay, which counts 664 hotels comprising 73,700 rooms, by 12 March.
Extended Stay’s newly announced plan flies in the face of a separate plan proposed last month by a group led by Starwood Capital Group. Unnamed sources told the Wall Street Journal in September that the group offered to buy Extended Stay’s first mortgage debt for US$3.5 billion.
A representative of Starwood Capital declined to comment Monday evening.
Extended Stay was acquired in June 2007 for US$8 billion by a group led by Lichtenstein.
HPT properties
In other Extended Stay bankruptcy news, a hearing regarding the operation of a collection of 17 hotels leased by a non-debtor subsidiary of debtor Homestead Village has been rescheduled to 8 April 2010. An entity owned by Lichtenstein, HFI Acquisitions Company, owns the properties.
The Homestead Village subsidiary, known as HVI, has leased the properties since 1999. But beginning in August 2009, according to court papers, HVI was unable to continue making lease payments.
Since that time, HVI, Homestead Village, HFI, and other involved parties have been negotiating a restructuring of the lease.
