Extended Stay emerges from bankruptcy under investor group ownership

By Caroline Salls

Pittsburgh, Oct. 12 - Extended Stay Inc. has emerged from Chapter 11 bankruptcy court, with an investment group including Centerbridge Partners, LP, Paulson & Co. Inc. and Blackstone Real Estate Partners VI, LP purchasing 100% of the company for $3.925 billion, according to a company news release.

The purchase was made in connection with Extended Stay's plan of reorganization, which was confirmed by the U.S. Bankruptcy Court for the Southern District of New York in July.

According to a court filing, the plan took effect on Friday.

"After reducing its debt burden by nearly $5 billion, Extended Stay will have the flexibility to improve its customer experience and offerings," a sponsor spokesperson said in the release.

The amount paid by the investors will be distributed to creditors under the plan.

Treatment of creditors will include:

• Holders of administrative claims, priority tax claims and priority claims will be paid in full in cash;

• Holders of mortgage facility claims will receive 100% of a cash distribution and investor certificates, which will be cancelled without any distribution;

• The holder of the ESA UD mortgage claim will receive a new mortgage note;

• Holders of mortgage facility deficiency claims, mezzanine facility claims and general unsecured claims will receive an interest in a litigation trust to the extent they are litigation trust beneficiaries;

• Holders of existing equity interests and other existing equity interests will receive no distribution; and

• Holders of various ESA trust certificates, borrower interests, properties interests, membership interests and partnership interests will retain those certificates and interests.

Gary DeLapp, president and chief executive officer of HVM, LLC, the separately owned company that manages the hotels throughout the United States and Canada, said in the release that HVM would continue to manage the portfolio of 685 properties despite the change in ownership.

In addition, the company said Doug Geoga has become the non-executive chairman of the board, which will also include former Dunkin' Donuts president and chief brand officer Will Kussell.

Weil, Gotshal & Manges LLP served as Extended Stay's lead bankruptcy counsel, and Lazard Ltd. was its financial adviser.

Extended Stay, a New York-based owner and operator of mid-priced extended stay hotels, filed for bankruptcy on June 15, 2009. Its Chapter 11 case number is 09-13764.

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