Extended Stay creditors object to plan based on CP ESH bid, say Starwood may have better offer

By Jennifer Lanning Drey

Portland, Ore., June 15 - Extended Stay Inc.'s official committee of unsecured creditors objected to the company's disclosure statement for its proposed plan of reorganization based on a plan sponsor agreement with CP ESH Investors, LLC, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The creditors committee said the plan is not confirmable, because the committee was recently approached by affiliates of Starwood Capital Group Global LP regarding an alternative plan funding proposal that it estimates would provide "hundreds of millions of dollars" in additional value for Extended Stay's estates and creditors.

The alternative proposal would also provide a meaningful distribution to some of the creditors holding $3.3 billion mezzanine facilities claims, the committee said in the filing.

As previously reported, Extended Stay said CP ESH Investors was selected as the high bidder at the company's auction for investment proposals, which was held May 27 and May 28.

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.

The creditors committee also claimed in their Monday filing that the auction violated the court-approved procedures.

According to the committee, the bid procedures order specifically authorized both structure and all-cash bids, but bidders were told at the auction that they must submit all-cash bids.

Starwood alternative

In a separate filing, Starwood Capital also objected to the Extended Stay disclosure statement based on the agreement with CP ESH Investors and said it is prepared to file an alternative plan.

According to that filing, under a Starwood plan the mortgage loan would be unimpaired, and Starwood would inject substantial new cash equity into the debtors.

Unsecured creditors would receive equity, warrants and the opportunity to subscribe to new equity on the same terms as Starwood.

The plan would also include a litigation trust and other consideration, according to the filing.

Starwood said it planned to file a motion to terminate Extended Stay's exclusive periods and said the company's disclosure statement should not be approved before then.

In its objection, the creditors committee asked that the disclosure hearing be held no sooner than July 6 and, preferably, on July 20.

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.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.