(Reuters) – Starwood Capital Group, which recently lost an auction to buy bankrupt hotel chain Extended Stay to a group led by Centerbridge Partners, plans to fight the deal in court, according to filings.
Starwood has filed an objection to the deal with the U.S. Bankruptcy Court in Manhattan, saying Extended Stay is worth substantially more than the price that Centerbridge Partners, Paulson & Co and Blackstone Group LP (BX.N) will pay.
Starwood also said that the auction process was flawed because of conflicts. It said that the cash bids required once the auction process was underway did not maximize value but instead were aimed at paying off only the secured creditors.
It said that unsecured creditors with combined claims of more than $3 billion would receive nothing.
Centerbridge and Paulson agreed to pay $3.925 billion in cash for the chain at the May 27 auction, beating out a bid from Starwood and TPG Capital by about $40 million, a source with direct knowledge of the deal told Reuters at the time.
Starwood said that based on projections it provided, Citigroup Global Markets had estimated that Extended Stay would be worth about $4.8 billion to $5.2 billion if it were now trading on the stock exchange.
The move comes ahead of a Thursday hearing, where the court will consider the disclosure statement of Extended Stay’s plan to emerge from bankruptcy.
Starwood, which is aiming to present its own plan to creditors, says the statement is not confirmable as a final plan to emerge from bankruptcy and does not provide enough information.
The case is in Re: Extended Stay Inc, U.S. Bankruptcy Court, Southern District of new York, No. 09-13764. (Reporting by Caroline Humer; Editing by Lisa Von Ahn)