July 20, 2010 / 5:01 PM / 9 years ago

UPDATE 4-US judge backs Extended Stay's reorganization plan

* Centerbridge, Paulson, Blackstone Group LP to take over

* Group agreed to pay $3.93 billion

* Plans to emerge from bankruptcy in September (Adds quote on planned emergence from bankruptcy, paragraph 3)

By Chelsea Emery

NEW YORK, July 20 (Reuters) - Extended Stay America Inc [ESAIN.UL] moved closer to emerging from bankruptcy on Tuesday as a judge confirmed the hotel chain’s plan of reorganization in which an investor consortium will take over the hotel chain for $3.93 billion.

Centerbridge Partners, Paulson & Co and Blackstone Group LP (BX.N) won an earlier bankruptcy auction and will own the chain of about 680 hotels.

The company expects “emergence in early to mid September,” said Jacqueline Marcus, an attorney for Weil, Gotshal & Manges LLP, who is representing Extended Stay.

Court approval comes after a tumultuous year, marked by a battle between the Centerbridge/Paulson team and a Starwood Capital Group-led faction who were vying for control of the chain of extended stay hotels.

“I am delighted that the parties have managed to craft so workable a plan in the context of so difficult and contentious a bankruptcy,” U.S. Bankruptcy Judge James Peck told a full courtroom in New York.

Starwood Capital had initially objected to the results of the auction, but later dropped its opposition.

Acting U.S. Trustee Tracy Hope Davis had also objected to the plan, saying that unsecured creditors would recover more if the Spartanburg, South Carolina-based company were to liquidate under Chapter 7 of the U.S. bankruptcy code, rather than reorganize under Chapter 11.

Those and other concerns were resolved, an attorney for the U.S. Trustee said on Tuesday at the U.S. Bankruptcy Court for the Southern District of New York in Manhattan.

“As a result of arduous efforts on the part of debtors, investors, the creditors committee (and other parties), we stand before you with an accepted plan, having resolved virtually every objection that has been filed,” said Marcus.

The company filed for court protection from creditors in June 2009, crushed under more than $7 billion in debt stemming from a 2007 leveraged buyout by Lightstone Holdings and the 2008 financial crisis.

The case is In re: Extended Stay Inc, U.S. Bankruptcy Court, Southern District of New York, No. 09-13764. (Reporting by Chelsea Emery; Editing by Tim Dobbyn and Matthew Lewis)

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