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Extended Stay Could Exit Bankruptcy By June

NEW YORK (Reuters) – U.S. mid-priced hotel chain Extended Stay America Inc could exit bankruptcy protection as soon as June, according to new reorganization plans filed on Friday.

The company, which runs over 650 hotels, said in court documents that it is seeking confirmation of its proposed bankruptcy reorganization in June, and could emerge from court protection as a privately held firm, backed by a new $450 million investment from private equity firms Centerbridge Partners L.P. and Paulson & Co Inc.

The company said the new cash would help it fund operations, make regular debt payments and allow it to spend money on hotel improvements.

Centerbridge and Paulson & Co will get a 22.5 percent stake in the reorganized firm, under the plan.

Extended Stay, which was bought in June 2007 by an investor group consortium led by David Lichtenstein’s Lightstone Group was forced into bankruptcy last year after its projected cash flows declined amid the recession and it could not continue to service its more than $7 billion in debt.

An examiner appointed by the court to investigate the company’s collapse is expected to complete his probe this week.

The company’s financial advisers at Lazard estimate the value of the reorganized company would be about $2.8 billion to $3.6 billion.

If general unsecured creditors vote for the plan, they could recover more than 89 percent of their claims as cash or warrants in the reorganized company, Extended Stay said in its reorganization plan documents. It does not have plans to list its shares on any stock exchange, it said.

The case is In re: Extended Stay Inc, U.S. Bankruptcy Court, Southern District of New York, No. 09-13764. (Reporting by Emily Chasan. Editing by Robert MacMillan)