Extended Stay files plan based on Centerbridge/Paulson/Blackstone bid

By Caroline Salls

Pittsburgh, June 9 - Extended Stay Inc. filed a plan of reorganization and related disclosure statement Tuesday based on a plan sponsor agreement with CP ESH Investors, LLC, according to filings with the U.S. Bankruptcy Court for the Southern District of New York.

CP ESH Investors is a newly formed entity owned by a consortium of investors consisting of Centerbridge Partners LP and Paulson & Co. Inc., on behalf of various investment funds and accounts they manage, and Blackstone Real Estate Partners VI LP, on behalf of itself and its parallel funds and related alternative vehicles.

Extended Stay said CP ESH Investors was selected as the high bidder "after several rounds of bidding at the auction."

Under the successful bid, the Centerbridge/Paulson/Blackstone investors offered to pay $3.925 billion in cash and to contribute certificates representing interests in the $4.1 billion mortgage loan for the equity of reorganized Extended Stay.

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

As a result, the company said the successful bid eliminates a rights offering, cash election and debt/equity election included in a previous 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.

Under the previous plan, these creditors were slated to receive 100% of the rights being issued under the plan, 100% of new class A1, A2, A3 and A4 mortgage notes, 470,482 of common interests in the reorganized company and 100% of new unsecured notes if they voted to accept the plan;

• 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.

Under the previous plan, mortgage facility deficiency creditors were scheduled to receive no distribution, provided, however, that they would have new class A warrants if they vote to accept the plan, and holders of general unsecured claims would have received no distribution, provided, however, that they would have received new class A warrants if they voted to accept the plan;

• 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.

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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