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March 18, 2010 2:21 PM

Greenberg, Ropes Advising on Extended Stay Investment Offer

Posted by Brian Baxter

Update, 3/18/2010, 4:25 p.m. -- This post has been updated with the names of additional law firms and lawyers working on the matter, as well as additional details about the terms of the deal in the third and fourth paragraphs below.

The bankruptcy of Extended Stay Hotels, the largest Chapter 11 case ever by a U.S. hotel owner, could be coming to a close after a consortium advised by Greenberg Traurig agreed to invest $905 million into the Spartanburg, S.C.-based hotel chain.

Starwood Capital Group, a private equity subsidiary of hotel and leisure company Starwood Hotels & Resorts, is leading the consortium that consists of private equity firm TPG Capital and investment and asset management firm Five Mile Capital Partners. Ropes & Gray advised TPG Capital on the offer.

Extended Stay accepted the Starwood proposal, Reuters reports, switching its support from an earlier plan that would see private equity firms Centerbridge Partners and Paulson & Co., Inc., take a 22.5 percent stake in a reorganized Extended Stay. That reorganization plan was backed by $450 million in financing from Centerbridge and Paulson.

According to Bloomberg, the new plan has a total transaction value of $3.9 billion. The plan would see Starwood become the lead "stalking horse" bidder to take Extended Stay out of bankruptcy, although another prospective bidder could still top its offer for the debtor. Starwood's proposal calls for the bankruptcy court to approve its offer by June 4.

Bruce Zirinsky, cochair of Greenberg’s business reorganization and bankruptcy practice, is advising Starwood and the consortium along with bankruptcy partner Gary Ticoll. Neither lawyer immediately responded to a request for comment.

Greenberg bankruptcy partners Nancy Peterman and Joseph "Jody" Davis III, M&A partners David Schwartzbaum and Anthony Marsico, real estate chair Robert Ivanhoe, real estate partners Stephen Rabinowitz, Howard Schochet, and Kenneth Sklar, and tax partners Steve Mastbaum and Jennifer Weiss rounded out the team from the firm. (Greenberg has a longtime relationship with Starwood.)

Ropes & Gray corporate/M&A partner Julie Jones, who heads the firm's securities and public companies practice, advised TPG on the proposed Extended Stay investment along with bankruptcy partner D. Ross Martin. The firm has a longtime relationship with TPG. (Jones didn't immediately respond to a request for comment.)

Weil, Gotshal & Manges business finance and restructuring chair Marcia Goldstein and restructuring partner Jacqueline Marcus are serving as lead debtor's counsel to Extended Stay. M&A partner Simeon Gold, corporate restructuring cochair Ted Waksman, real estate cochair J. Philip Rosen, tax partners Scott Sontag and Larry Gelbfish, employee benefits partner Michael Kam, and environmental litigation chair David Berz round out the Weil team advising Extended Stay.

The Starwood-led proposal already has the support of Extended Stay creditors. Mark Power, a bankruptcy partner at New York firm Hahn & Hessen, representing Extended Stay's official committee of unsecured creditors, told Reuters that the Starwood offer is a sign that there's significant interest in the debtor.

"Starwood has come in with an alternative proposal and the debtors advised us that they will file a motion before the end of the week seeking approval of the Starwood proposal," Power said. "We anticipate there will be a period for interested parties to do due diligence and submit higher and better proposals."

Fried, Frank, Harris, Shriver & Jacobson bankruptcy and restructuring chair Brad Scheler and litigation partner Gregg Weiner are representing Centerbridge on its offer for Extended Stay, while Gibson, Dunn & Crutcher business restructuring cochair David Feldman is advising Paulson & Co.

Contact Brian Baxter at bbaxter@alm.com.



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