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Leads creditors group offering to buy bankrupt chain’s first mortgage
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A group of creditors led by Starwood Capital Group is trying to wrest control of the bankruptcy of Extended Stay Inc., The Wall Street Journal reports. The investor group – which also includes Fortress Investment Group LLC, D.E. Shaw Group and Five Mile Capital Partners LLC – is proposing to buy Extended Stay's $4.1 billion first mortgage, which was carved up into commercial-mortgage-backed securities, for $3.5 billion, people familiar with the matter say. The offer calls for the group to put in more than $700 million in new equity and most of the existing bondholders to continue holding their debt.
The 680 Extended Stay properties would have a higher valuation under the Starwood-led proposal, the Journal reports. The investors in the Starwood group are existing creditors in Extended Stay, and are at risk of taking big losses under a reorganization plan proposed by the company.
The Journal alsosaid move by the creditors is another sign that savvy investors are looking to swoop in on distressed commercial properties as the capital markets begin to ease for big corporate and private borrowers. Starwood Capital, led by real-estate investor Barry Sternlicht, has closed a $2 billion private-equity fund to buy distressed hotel assets and recently launched a real-estate investment trust to invest in commercial-property debt by raising $950 million in new capital.
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