Deals

Extended Stay emerges from Chapter 11

Centerbridge Properties, Paulson & Co and the Blackstone Group have acquired the hotel group for $3.9bn

By
Robin Marriott
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Extended Stay has emerged from Chapter 11 bankruptcy, as a trio of investors have purchased the group for $3.9 billion. New York’s Centerbridge Partners, which has around $12 billion in capital under management and was established in 2006, has teamed up with investment management firm Paulson & Co and The Blackstone Group to acquire the hotel business.

The deal follows a ‘Plan of Reorganisation’ confirmed by the Bankruptcy Court in July this year. Extended Stay itself went into bankruptcy protection in June 2009.

According to a statement by Extended Stay, Blackstone has used a real estate fund, Blackstone Real Estate Partners VI, to fund its part of the acquisition, though a breakdown of equity injections per investor has not been made public.

A spokesperson for the trio of investors said Extended Stay had maintained “market leadership” throughout the challenges of the past two years, which included reducing leverage by nearly $5 billion.

Gary DeLapp, president and chief executive of HVM, the separately owned company that manages the hotels throughout the US and Canada, said he was “extremely gratified” that all hotels remained open and operating during the restructuring process. Extended Stay owns hotels in 685 locations and is the largest company-owned and operated chain of extended stay hotels in North America. 

The law firm of Weil, Gotshal & Manges LLP served as lead bankruptcy counsel for Extended Stay, while Lazard was financial advisor. Fried, Frank, Harris, Shriver & Jacobson and Houlihan Lokey represented the investors.  Simpson Thacher & Bartlett LLP provided additional legal advice to Blackstone and Centerbridge, while Gibson, Dunn & Crutcher and Kleinberg, Kaplan, Wolff & Cohen advised Paulson & Co.

Earlier this year, Extended Stay attracted another bidder. A team comprised of Starwood Property, private equity firm TPG Capital and Five Mile Capital Partners bid to invest $905 million, but the offer was not preferred.

Problems at the group began when New Jersey-based private equity firm Lightstone Group acquired Extended Stay from Blackstone for $8 billion in 2007. It used $1 billion of equity and $7 billion of debt to finance the acquisition.