Extended Stay Inc., which last year filed the largest bankruptcy by a U.S. hotel owner, today exited Chapter 11 after its $3.93 billion sale to Centerbridge Partners LP, Paulson & Co. and Blackstone Group LP was completed.
Extended Stay cut its debt burden by almost $5 billion in the bankruptcy process, the Spartanburg, South Carolina-based company said in a statement today.
The acquisition by the Centerbridge-led group concluded after Starwood Capital Group LLC, one of Extended Stay’s creditors, dropped its objection to the transaction in June. Starwood had opposed the sale after losing an auction for the hotelier in May.
The company’s spending plan includes “significant investment” in property upgrades, Gary DeLapp, president and chief executive officer of HVM LLC, Extended Stay’s management company, said in today’s statement.
Extended Stay, which operates more than 600 hotels, was weighed down by declining business-travel spending and debt from its 2007 sale by Blackstone to a group led by Lightstone Group LLC. Lightstone, run by David Lichtenstein, used more than $7 billion in debt to complete the $8 billion purchase, weeks before the leveraged-buyout market imploded.
Extended Stay had $7.6 billion in debt when it sought bankruptcy protection in 2009. The U.S. government was among Extended Stay’s biggest creditors, with more than $1 billion in claims from a trust created for collapsed Bear Stearns Cos.
In August, holders of Extended Stay debt withdrew a request to sue Blackstone, Lightstone and others involved in the sale. Creditors had filed a motion in April to sue, claiming the deal led to the hotelier’s collapse.
Proceeds from the sale to Centerbridge, Paulson and Blackstone, all based in New York, will be used to pay down Extended Stay’s $4.1 billion of mortgage debt.
Doug Geoga, former president of Global Hyatt Corp., will be Extended Stay’s chairman, the company said today. Will Kussell, former president and chief brand officer of Dunkin’ Donuts, also will be on the hotelier’s board.
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