George S. May Business Blog

Extended Stay Hotels LLC files for bankruptcy

In what should be a surprise to many, Extended Stay Hotels LLC filed for Chapter 11 bankruptcy protection, making the 680-property chain one of the largest of its kind to ever do so.
The bankruptcy filing, made in a U.S. Bankruptcy Court for the Southern District of New York in Manhattan, listed $7.6 billion in debt for the company and $7.1 billion in assets. Approximately 10,000 people work in the properties, which are scattered around 44 U.S. states and two Canadian provinces.

The over-leveraged Lightstone Group, who borrowed $7.4 billion to buy the company from The Blackstone Group two years ago, began negotiations to restructure $3.3 billion of its debt late last year, but negotiations broke down. Then in the last two weeks several of the company’s investors sued banks which provided the financing, accusing them of conspiring to take over the properties and “wipe them out.”

The company says that it plans to continue operation as normal and will be funded by day-to-day cash, rather than investor funding.

This news just adds fuel to the fire that is burning through the troubled hotel and hospitality industry. Both business and leisure travel is way down currently, forcing providers to lower their rates. In further grim news for the weakening industry, two of the biggest hotel and lodging companies in the country, Marriott International and Host Hotels and Resorts, reported first quarter losses in the first quarter of 2009. Also, the Fontainebleau Las Vegas filed for bankruptcy last week, closing a multi-billion-dollar project.

Extended Stay Hotels LLC’s U.S. and Canadian holdings include brands such as Extended Stay Deluxe, Extended Stay America Efficiency Studios, Homestead Studio Suites, StudioPLUS Deluxe Studios, and Crossland Economy Studios.

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