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Starwood Capital consortium to invest up to USD905m in Extended Stay

Starwood Capital Group, TPG Capital and Five Mile Capital Partners have reached an agreement to invest up to USD905m in Extended Stay Hotels as part of a recapitalisation plan that would allow the hotel chain to emerge from bankruptcy.

The proposal, which was filed with the US Bankruptcy Court, Southern District of New York, would allow Extended Stay, which would be valued at approximately USD3.9bn post-transaction, to emerge from bankruptcy with a stronger balance sheet, reduced debt load and significant cash reserves to invest in its properties and operations.

The Extended Stay board of directors has determined the offer is superior to a previous agreement with Centerbridge Partners and Paulson, which has been terminated.

The consortium’s plan is not conditioned on any financing or due diligence provisions, but is subject to approval of the Bankruptcy Court.   

"We are excited about the prospects of acquiring Extended Stay," says Barry Sternlicht, chairman and chief executive of Starwood Capital Group. "We believe we have made a very compelling offer with the specific intent of balancing and considering the interests of all stakeholders involved here.  Starwood Capital has unparalleled experience in the hospitality sector and we believe we are uniquely positioned to work with the team to help the company flourish and maximize the company’s potential for all stakeholders."

As part of the agreement, the consortium would invest USD450m of equity directly into Extended Stay and has also agreed to backstop a USD200m equity rights offering, thereby infusing USD650m of new capital into the company. In addition, the consortium will commit USD255m to provide a cash alternative for creditors who prefer cash to the equity they would receive as part of the plan of reorganisation.

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