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Lakewood, NJ - Extended Stay Hotels Files For Chapter 11 |
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The filing, made in U.S. Bankruptcy Court for the Southern District of New York in Manhattan, came as a legal battle accelerated among the creditors who hold debt from the buyout by Lightstone Group LLC. Those lenders include Bank of America and its Merrill Lynch unit and Wells Fargo & Co.'s Wachovia. Since late last year, creditors have been negotiating with Lightstone over a possible restructuring of the debt.
U.S. taxpayers also have had an interest in the 680-property chain because another lender in the buyout was Bear Stearns Cos., whose stake was taken over by the Federal Reserve after Bear collapsed in March 2008. BlackRock Inc. has been representing the Fed in the restructuring talks, according to people with knowledge of the negotiations.
The voluntary bankruptcy petition came as a surprise because up until now, industry experts have said the way the loan is structured would have made a bankruptcy filing unlikely. For one thing, they have said, a filing would expose the other assets owned by Lightstone's owner, David Lichtenstein, to Extended Stay's creditors. Mr. Lichtenstein wasn't immediately available for comment.
In its court papers filed Monday, Extended Stay listed $7.1 billion in assets and $7.6 billion in debts at the end of last year. The company has about 10,000 employees.
Lightstone Group, a Lakewood, N.J., company founded by Mr. Lichtenstein, bought Extended Stay from Blackstone Group LP for $8 billion in April 2007. The deal was highly leveraged, making Extended Stay especially vulnerable to a market downturn. 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. Most of the holders of junior mezzanine debt bought at a discount, some around 60 cents on the dollar, but others as low as 10-15 cents, say debt holders.
The hotel chain was served a notice of default in May. Both the senior and mezzanine loans matured on Friday, with extension options.
Creditors and Mr. Lichtenstein went into restructuring talks late last year because it was clear to all that Extended Stay would soon fall short on paying debt service, given the market downturn. At one point, there appeared to be a deal that would have involved mezzanine investors exchanging their debt for preferred equity in the property, according to people familiar with the matter.
But that deal collapsed. Wachovia, which is the servicer of the mezzanine and first mortgage debt as well as a lender, declared a default in late May after Extended Stay failed to pay a $3.5 million late phone bill, according to the people familiar with the matter.
A group of investors that bought hundreds of millions of dollars of mezzanine debt filed lawsuits during the past two weeks, alleging that lenders that provided $7.4 billion in financing to Lightstone are engaged in a "scheme" to take over the property and wipe out the mezzanine investors.
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Read Comments (26) — Post Yours »
1
Jun 15, 2009 at 12:25 PM wow Says:
All i can say is WOW. Never be JEALOUS of anybody.....
2
Jun 15, 2009 at 01:11 PM Anonymous Says:
If one would do his resaerch he would see that Mr. Lichtenstein has plan for this as well.
3
Jun 15, 2009 at 01:09 PM nu? Says:
was r yossel t also a partner?
4
Jun 15, 2009 at 01:09 PM Anonymous Says:
“ All i can say is WOW. Never be JEALOUS of anybody..... ”
I doubt Lichtenstein loses a penny in all of this.
5
Jun 15, 2009 at 01:02 PM KACH 613 Says:
Is he the one that had Hillary Clinton at his home?
6
Jun 15, 2009 at 12:44 PM Anonymous Says:
“ All i can say is WOW. Never be JEALOUS of anybody..... ”
It would also be nice to daven for him and all yidden that Hashem bentched with money who support our mosdos. Our day schools and yeshivos and to many individuals are suffering financially and we should daven that everyone have a parnassah and the parnasai hador should have the means to give big donations.
7
Jun 15, 2009 at 01:39 PM Anonymous Says:
Don't know if d losses or not, but there're a lot of himsha people that have invested there, inc my self 800K, I guess we live to learn
8
Jun 15, 2009 at 01:35 PM Anonymous Says:
"$3.5 million late phone bill"
How is it possible to rack up a phone bill that high??
9
Jun 15, 2009 at 12:31 PM Anonymous Says:
“ All i can say is WOW. Never be JEALOUS of anybody..... ”
Don't worry, this is all business. He'll still be doing more than fine.
10
Jun 15, 2009 at 02:01 PM gevaldig Says:
dont worry....only the banks loose and the government helps them...good for all of us
11
Jun 15, 2009 at 02:27 PM whatever Says:
This place is a dump anyways.
12
Jun 15, 2009 at 03:15 PM Anonymous Says:
The Lightstone feeds many yiddishe families…
13
Jun 15, 2009 at 03:13 PM shmuel Says:
He is a fine person, a baal tzedakah who has given parnasa to many. I wish him only the best.
14
Jun 15, 2009 at 03:09 PM Anonymous Says:
“ Don't know if d losses or not, but there're a lot of himsha people that have invested there, inc my self 800K, I guess we live to learn ”
wow $800,000. I hope you didnt lose it.
15
Jun 15, 2009 at 02:15 PM Anonymous Says:
“ dont worry....only the banks loose and the government helps them...good for all of us ”
For those of us who pay taxes, WE end up paying for it. Where do you think the government gets its money from?!
16
Jun 15, 2009 at 03:48 PM Anonymous Says:
The Lightstone feeds many yiddishe families…
17
Jun 15, 2009 at 04:07 PM PMO Says:
“ For those of us who pay taxes, WE end up paying for it. Where do you think the government gets its money from?! ”
Thank you! All these bankruptcies that allow companies to continue on as if nothing ever happened are killing the rest of us financially. WE pay more in interest and more in taxes because these companies go into default. The banks lose money so we have to pay it. The government loses OUR money so we have to give them more. It is terrible. I hope this company succeeds. I hope this man builds an empire to continue helping yidden... but if it is at the expense of everyone else, what good is it?
18
Jun 15, 2009 at 04:57 PM Frequent Flyer Says:
Its a shame because their brand is nice and the prices are not really outrageous eitehr. #11 you are completly incorrect about ESA being a dump. They are FAR from it!
19
Jun 15, 2009 at 06:07 PM Hate em Tatem Says:
“ Thank you! All these bankruptcies that allow companies to continue on as if nothing ever happened are killing the rest of us financially. WE pay more in interest and more in taxes because these companies go into default. The banks lose money so we have to pay it. The government loses OUR money so we have to give them more. It is terrible. I hope this company succeeds. I hope this man builds an empire to continue helping yidden... but if it is at the expense of everyone else, what good is it? ”
You are incorrect. Your knowledge of bankruptcy law is weak. I suspect it may be zero.
If a company is filing for bankruptcy, the company is having trouble paying their bills as it is. This is the only way for a company to survive. The banks will not get all their money if the company does not go into bankruptcy. The purpose of a chapter 11 is to restructure and gives the creditors something they can live with and let the company continue. In every chapter 11, the secured creditors are entitled to at least how much they would have gotten had the company been liquidated. If there was no bankruptcy, the situation would be a lot worse.
20
Jun 15, 2009 at 07:31 PM Esq. Says:
Mr lichtenstien couldn't of made a better dicision all he looses is that the gov. gets involved but he is still a extremely wealthy man
21
Jun 15, 2009 at 07:08 PM PMO Says:
“ You are incorrect. Your knowledge of bankruptcy law is weak. I suspect it may be zero.
If a company is filing for bankruptcy, the company is having trouble paying their bills as it is. This is the only way for a company to survive. The banks will not get all their money if the company does not go into bankruptcy. The purpose of a chapter 11 is to restructure and gives the creditors something they can live with and let the company continue. In every chapter 11, the secured creditors are entitled to at least how much they would have gotten had the company been liquidated. If there was no bankruptcy, the situation would be a lot worse. ”
I should clarify myself. I know about bankruptcy.
My problem is that companies have made "bankruptcy" such a common option for business continuity it makes me sick. Companies just seem to file bankruptcy as just another business decision. The government has made it too easy.
Companies are far more likely to be RESPONSIBLE with their money if they really had something in it to lose. With bankruptcy protection, it is almost as if these businesses have nothing to lose by running the bank accounts down to the bottom. If some companies have to go out of business and liquidate, so be it. The next guy will know better.
22
Jun 15, 2009 at 11:00 PM Hate em Tatem Says:
“ I should clarify myself. I know about bankruptcy.
My problem is that companies have made "bankruptcy" such a common option for business continuity it makes me sick. Companies just seem to file bankruptcy as just another business decision. The government has made it too easy.
Companies are far more likely to be RESPONSIBLE with their money if they really had something in it to lose. With bankruptcy protection, it is almost as if these businesses have nothing to lose by running the bank accounts down to the bottom. If some companies have to go out of business and liquidate, so be it. The next guy will know better. ”
Once again, you demonstrated how your knowledge of bankruptcy is weak or non-existant.
Bankruptcy has been an option for a long time. Even in bankkruptcy companies have what to lose. There is almost always a next guy in a chapter 11 as the there is usually a trustee and the trustee will petition the court a change in the corporate officers. Also, running up debt with the idea to file bankruptcy is fraud and there is no bankruptcy protection for fraud.
There are other safeguards. For example, creditors under certain circumstances can file for an involuntary bankruptcy. Another example is that partially secured creditors can elect an 1111(b).
There are also non-bankruptcy options such as an assignment for the benefit of creditors.
Bankruptcy does not cost taxpayers any more money. A company can only file bankruptcy once every 7 or 10 years, depending on the type of bankruptcy. What does cost money is when fools like Bush and Muslimbama bail out companies that should have gone into bankruptcy in the first place.
The again, that is my opinion. You stated that know about bankruptcy.
23
Jun 16, 2009 at 01:25 AM PMO Says:
“ Once again, you demonstrated how your knowledge of bankruptcy is weak or non-existant.
Bankruptcy has been an option for a long time. Even in bankkruptcy companies have what to lose. There is almost always a next guy in a chapter 11 as the there is usually a trustee and the trustee will petition the court a change in the corporate officers. Also, running up debt with the idea to file bankruptcy is fraud and there is no bankruptcy protection for fraud.
There are other safeguards. For example, creditors under certain circumstances can file for an involuntary bankruptcy. Another example is that partially secured creditors can elect an 1111(b).
There are also non-bankruptcy options such as an assignment for the benefit of creditors.
Bankruptcy does not cost taxpayers any more money. A company can only file bankruptcy once every 7 or 10 years, depending on the type of bankruptcy. What does cost money is when fools like Bush and Muslimbama bail out companies that should have gone into bankruptcy in the first place.
The again, that is my opinion. You stated that know about bankruptcy. ”
OH! Thank you so much... I had no idea that the HUNDREDS OF MILLIONS of dollars spent every year by the government on processing bankruptcies (court costs, attorney costs, accounting firm costs, receivership costs, Auditors, etc.) did not come from my tax money. I'm guessing it came from the same magical fairy tree that pays for welfare and all the other socialist nonsense too. I am so relieved to hear it!
Secondly, I am so relieved to hear that the 30-80% losses that banks and investors have to take don't cost me either. I'm so glad that the banks have a magical fairy tree to get their money back as well. All this time I thought I had to pay higher interest rates to cover these massive losses.
If companies did not have this phony safety net of corporate socialism they would have to either close up or liquidate BEFORE hitting the skids financially. They would break up their companies while the companies still had value. Now, they are just allowed to plummet straight into the ground and we are left to pay their debts one way or another while the executives continue getting rich.
Your narrow-minded view (clearly from the side of the 'bankrupted') is foolish and ignorant. I can only assume that you have been bankrupted yourself or you represent those in bankruptcy in some way.
24
Jun 16, 2009 at 06:18 AM Hate em Tatem Says:
“ OH! Thank you so much... I had no idea that the HUNDREDS OF MILLIONS of dollars spent every year by the government on processing bankruptcies (court costs, attorney costs, accounting firm costs, receivership costs, Auditors, etc.) did not come from my tax money. I'm guessing it came from the same magical fairy tree that pays for welfare and all the other socialist nonsense too. I am so relieved to hear it!
Secondly, I am so relieved to hear that the 30-80% losses that banks and investors have to take don't cost me either. I'm so glad that the banks have a magical fairy tree to get their money back as well. All this time I thought I had to pay higher interest rates to cover these massive losses.
If companies did not have this phony safety net of corporate socialism they would have to either close up or liquidate BEFORE hitting the skids financially. They would break up their companies while the companies still had value. Now, they are just allowed to plummet straight into the ground and we are left to pay their debts one way or another while the executives continue getting rich.
Your narrow-minded view (clearly from the side of the 'bankrupted') is foolish and ignorant. I can only assume that you have been bankrupted yourself or you represent those in bankruptcy in some way. ”
"Your narrow-minded view (clearly from the side of the 'bankrupted') is foolish and ignorant. I can only assume that you have been bankrupted yourself or you represent those in bankruptcy in some way."
Actually neither. But very presumptious of you. You are quite ignorant on the subject.. The court costs are paid by the corporations, not you. If a company is filing for bankruptcy, the stock price is already way down. Bankruptcy helps the investors, not hurt them. It is not a safety net. The banks and investors do not take these losses. Facts are facts, not what you want them to be.
You may have higher interest rates from your bank for them lending money to failing companies. That has nothing to do with these corporations. It is the pathetic banks that make these stupid moves so they can make a quick buck and do not think through the long term effects.
25
Jun 18, 2009 at 12:02 PM Anonymous Says:
The strike at Beis Hatorah was cuased by loss of their investment with Lichtenstein
26
Jun 19, 2009 at 10:05 AM Anonymous Says:
“ The strike at Beis Hatorah was cuased by loss of their investment with Lichtenstein ”
Rabbi Gotlieb says he has no investment with Lichtenstein. The strike was a political issue. It is leading other Yeshivos into striking.