Why did Extended Stay Hotels file for Chapter 11 bankruptcy protection?
U.S. hotel chain Extended Stay Inc filed for bankruptcy protection on Monday, becoming the latest victim of the U.S. recession as business travel has declined amid corporate cutbacks. The company, which filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Manhattan, said it had no plans to close or sell any of its hotels. The company also said it did not seek any debtor-in-possession financing as it generates “significant positive cash flow.” Extended Stay is the latest highly leveraged company to file for bankruptcy after struggling with a faltering economy and large debt load, joining companies such as media group Tribune Co. In documents filed with the court, the company said it was in a liquidity crisis as the recession had a devastating impact on occupancy rates. Extended Stay said it was “significantly over-leveraged” and the projected cash flows could not continue to service its debt, which is in excess of $7 billion. In its filing, Extended Stay listed assets of about $7
Extended Stay Hotels LLC filed for Chapter 11 bankruptcy protection on Monday, citing massive debt stemming from its 2007 acquisition by the Lightstone Group and a sharp drop in business travel due to the recession. The Spartanburg, S.C.-based company’s brands include Extended Stay Deluxe, Extended Stay America Efficiency Studios, Homestead Studio Suites, StudioPLUS Deluxe Studios and Crossland Economy Studios. The privately held company owns more than 680 hotels in the U.S. and Canada catering to long-term business travelers. The hotels are managed by HVM LLC, a separate company. In June 2007, just as the hotel market peaked, the Lightstone Group, one of the country’s largest private real estate investors, bought Extended Stay from private equity firm Blackstone Group LP. Lightstone financed the purchase with about $7.4 billion in loans. By last summer, hotel occupancy was softening, and it declined sharply after September. Led by a drop in corporate travel, that decline has accelerat
In its court papers filed June 15, 2009 Extended Stay listed $7.1 billion in assets and $7.6 billion in debts at the end of last year. Lightstone Group, a Lakewood, N.J., company bought Extended Stay from Blackstone Group LP for $8 billion in April 2007. The hotel chain has $4.1 billion in a senior first mortgage that was mostly sold to investors as commercial-mortgage-backed securities, or CMBS. Behind those secured creditors is the $3.3 billion of mezzanine debt divided into 10 classes ranked one through 10 in seniority. The chain defaulted on its debt in May. It had been trying to restructure its debts since late 2008. Sources: http://online.wsj.com/article/SB124507864459215309.
