A consortium of investors led by Starwood Capital Group is closing in on a deal to receive $2.2 billion in financing from Goldman Sachs as it bids for the bankrupt hotel chain Extended Stay, according to The Wall Street Journal. All bids for the hospitality chain must be submitted to the bankruptcy judge overseeing Extended Stay’s Chapter 11 proceedings by 17 May, according to the report.
The proposed deal is said to be the largest mortgage-debt financing for a real estate venture since the credit crunch hit two years ago. Approximately $1 billion of the money will reportedly come from Goldman’s partner in the deal, Citigroup.
Spokespersons for Starwood and Goldman Sachs declined to comment on the anticipated deal.
A rival group led by private equity firm Centerbridge Partners, which includes hedge fund Paulson & Co. and private equity and real estate firm The Blackstone Group is also in contention for the 680-property chain, according to the report, and is likewise in need of financing for a bid. A public auction, expected to attract additional bidders, is reportedly set for 27 May.
Starwood’s original $905 million recapitalisation bid for Extended Stay, which included co-financing from TPG Capital and Five Mile Capital, was backed by the hotel group’s board in March, which valued the company, post bankruptcy, at $3.9 billion. That offer was later matched by Centerbridge after attracting interest from Blackstone, which agreed to invest a reported $100 million for a minority stake in the company – between 10 percent and 25 percent – after it emerged from bankruptcy.
Extended Stay was originally bought by private equity real estate firm The Lightstone Group for $8 billion, and filed for bankruptcy in June 2009 after it had $7.1 billion in assets and $7.6 billion in debt.