Extended Stay hotel chain reportedly sold to investor group

A group of investors won a bankruptcy auction for hotel chain Extended Stay Inc. with a $3.9-billion bid, two people familiar with the matter said Friday.

Extended Stay, which filed for bankruptcy protection last June, selected the proposal by Paulson & Co., Centerbridge Partners and Blackstone Group over a rival bid from Starwood Capital Group and TPG Capital after an all-night auction, the people said.

The two groups were competing for months to invest in Extended Stay and its portfolio of more than 600 hotels.

The $3.9-billion investment, which requires court approval, will give Paulson, Centerbridge and Blackstone 100% of the equity in Extended Stay when it emerges from bankruptcy, one person said. An earlier agreement called for the Spartanburg, S.C., company’s senior lenders and investors to each receive equity stakes, according to court documents.

In 2007, Blackstone sold Extended Stay to an investor group led by real estate investment firm Lightstone Group for $8 billion. Blackstone retained some equity in Extended Stay.

The $3.9-billion cash offer, which beat Starwood’s final bid of $3.88 billion, will go toward paying down Extended Stay’s $4.1-billion mortgage debt.