Extended Stay Litigation Trust Sues Blackstone, Lightstone

The Extended Stay litigation trust has sued the Blackstone Group, the Lightstone Group and others involved in the 2007 buyout of the hotel chain, Reuters reported. In a lawsuit filed Tuesday, the trust charged that Blackstone had skimmed $2.1 billion from Extended Stay at the closing of the leveraged buyout, leaving the company under-capitalized and unable to survive, Reuters wrote. Extended Stay filed for bankruptcy protection in June 2009 with more than $7 billion in debt. The firm emerged from bankruptcy more than a year later, with a consortium including Blackstone, Paulson & Co. and Centerbridge Partners buying the chain for $3.9 billion.

(Reuters) – Extended Stay litigation trust sued the Blackstone Group LP , The Lightstone Group and other parties involved in Extended Stay’s 2007 leveraged buyout.

In a lawsuit filed late on Tuesday at a Manhattan bankruptcy court, the litigation trust said Blackstone siphoned off $2.1 billion from Extended Stay at the closing of the 2007 buyout, leaving it insolvent, undercapitalized and unable to survive.

Blackstone was not immediately available for comment.

“The grossly inflated purchase price was engineered by the Blackstone-affiliated Sellers looking to maximize their profits, working in concert with a Buyer that assumed little to no risk of loss,” the lawsuit said.

Extended Stay America Inc , a chain of about 680 hotels, filed for Chapter 11 protection in June 2009, with more than $7 billion in debt stemming from the 2007 buyout by Lightstone Holdings and the 2008 financial crisis.

It emerged from bankruptcy in October, 2010 as an investment group — including Blackstone, Paulson & Co and Centerbridge Partners — bought the hotel chain for $3.925 billion. (Reporting by Santosh Nadgir; Editing by Joyjeet Das)