Blackstone Group LP, Bank of America Corp. and Citigroup Inc. agreed to pay a total of $10.2 million to settle litigation over the buyout of hotel owner Extended Stay.
Blackstone and the two banks were among defendants sued in 2011 by a trust established to recover money for creditors of Extended Stay, which was sold by Blackstone in 2007 and filed for bankruptcy about two years later.
The settlements were reached after court rulings in other cases became an “impediment” to recovering damages, lawyers for the trustee said in papers filed today in U.S. Bankruptcy Court in Manhattan.
“The likelihood of the plaintiffs successfully obtaining any recoveries against Citigroup, the Blackstone defendants and Bank of America defendants through litigation is doubtful,” the lawyers said.
The creditor trust claimed the buyout by Lightstone Group left Extended Stay insolvent and that the hotel owner’s assets were depleted by more than $100 million after the deal through improper distributions, according to court papers. Lightstone was also sued.
Under the settlement, Blackstone will pay $10 million to the trust and Citigroup will pay $200,000, according to the court filing. Both companies are based in New York. Bank of America, based in Charlotte, North Carolina, and Citigroup were advisers on the buyout.
The cases are Extended Stay Litigation Trust v. Blackstone Group LP, 11-02254 and 11-02255, U.S. Bankruptcy Court, Southern District of New York (Manhattan).