The Work

May 28, 2010 3:23 PM

The Bankruptcy Files: Oil Companies Go Bust as Extended Stay Seeks Solvency

Posted by Brian Baxter

A group of private equity investors has won an auction for bankrupt hotel chain Extended Stay Hotels, The Wall Street Journal reports.

Extended Stay, which markets itself to guests booking long-term reservations, sought Chapter 11 protection a year ago as a result of corporate cutbacks on business travel. Extended Stay, also known as HVM LLC, has been on the block for the past several months as different investor groups vied for control of the Spartanburg, S.C.-based company.

A group led by New York-based private equity firm Centerbridge Partners prevailed in a bankruptcy auction for Extended Stay by bidding $3.9 billion for the company's 680 properties, according to the WSJ. The proposed sale involved enough lawyers to fill one of Extended Stay's hotels, as almost a dozen law firms landed key roles advising clients during the company's yearlong bankruptcy case. (Billing rates for partners are listed parenthetically, when available.)

Weil, Gotshal & Manges restructuring chair Marcia Goldstein ($990), corporate partner Ted Waksman ($990), and bankruptcy partner Jacqueline Marcus ($870) are leading a team from the firm advising Extended Stay in bankruptcy proceedings. Court filings show that the firm has submitted bills for more than $5 million in fees and expenses through February of this year.

Covington & Burling insurance litigation partners William Greaney ($779) and Georgia Kazakis ($591) are serving as special counsel to Extended Stay. The firm, which has submitted legal bills in the Chapter 11 case totaling more than $1.3 million, is giving the company a 12.5 percent discount on its normal hourly rate.

According to the latest monthly operating report filed by Extended Stay, the company also has paid more than $5 million to five other firms since its bankruptcy filing on June 15 of last year. Latham & Watkins has received nearly $2.2 million, McKenna Long & Aldridge more than $2.7 million, New Jersey firm Sills Cummis & Gross $33,924, and Canadian firm Miller Thomson $8,473. (Another Canadian firm, Cassels Brock & Blackwell, is listed as having an unpaid bill of $31,599.)

Bankruptcy partners Mark Power ($760), Mark Indelicato ($760), and Christopher Jarvinen ($595) with New York's Hahn & Hessen are representing Extended Stay's official committee of unsecured creditors. The firm has submitted bankruptcy bills totaling nearly $2.4 million, although Hahn & Hessen did reduce that amount by nearly $40,000 in response to an objection by the U.S. trustee.

Ralph Mabey ($875), senior of counsel with Los Angeles bankruptcy boutique Stutman, Treister & Glatt, is serving as court-appointed examiner in the bankruptcy cases of Extended Stay. Court filings show that Mabey, who filed his report in early April, has sought nearly $161,660 for his efforts.

Partners Robert Greenfield ($895), George Webster II ($775), Eric Goldberg ($675), and H. Alexander Fisch ($440) are representing Mabey along with of counsel Margreta Morgulas ($495). Court documents show that Stutman has sought more than $1.7 million for its role on behalf of Mabey.

The different investor groups vying for control of Extended Stay also employed their own legions of lawyers. Centerbridge turned to Fried, Frank, Harris, Shriver & Jacobson bankruptcy chair Brad Scheler and bankruptcy partner Jennifer Rodburg for representation in the auction for Extended Stay.

The Centerbridge-led group acquiring Extended Stay also includes private equity firms Paulson & Co. and The Blackstone Group. Gibson, Dunn & Crutcher business restructuring cochair David Feldman is advising Paulson & Co., which beat out a rival bid by Starwood Capital Group. (As previously reported by The Am Law Daily, Greenberg Traurig and Ropes & Gray advised the Starwood-led consortium seeking to take control of Extended Stay.)

Approval of any final acquisition will have to come from U.S. bankruptcy judge James Peck in Manhattan.

Other recent bankruptcy filings that have crossed our radar:


Reuters reports that Denver-based natural gas driller North American Petroleum filed for bankruptcy on May 25 in Delaware as a result of a drilling dispute with a major client, Calgary-based Enterra Energy. NAP, which is a subsidiary of Canadian oil exploration and production company Petroflow Energy, claims that it was forced into Chapter 11 after Enterra instructed customers to withhold making payments to the company.

Kirkland & Ellis restructuring partners David Seligman and Ryan Bennett are advising NAP in its Chapter 11 case. Morton Branzburg, a founding partner and bankruptcy cochair at Klehr Harrison Harvey Branzburg, is serving as Delaware counsel to NAP along with bankruptcy partner Domenic Pacitti. Neither firm has yet submitted billing statements to the bankruptcy court.

According to The Canadian Press, Enterra claims that it's owed $8.2 million from NAP and another Petroflow unit called Prize Petroleum. Louis Strubeck, Jr., head of the bankruptcy and insolvency group in Fulbright & Jaworski's Dallas office, is advising Enterra in NAP's Chapter 11 case along with senior associate Kristian Gluck.


Dallas-based oil and gas exploration company TriDimension Energy and seven of its affiliates filed for bankruptcy in Dallas on May 27. TriDimension, which blamed its bankruptcy filing on low energy prices, leases oil and gas properties in Louisiana and Mississippi. The company owes $37.5 million to secured lenders that are providing debtor-in-possession financing so TriDimension can continue operations.

Vinson & Elkins restructuring partner William Wallander and energy partner Rodney Moore are advising TriDimension in Chapter 11 proceedings. Court records show that the company paid V&E $538,633 in the year prior to its bankruptcy filing. Lawyers from the firm, which is holding a $64,820 retainer, are billing the debtor at hourly rates ranging from $295 to $880.

Stuart Simoneaud, a partner with Ottinger Hebert in Lafayette, La., is serving as special and conflicts counsel to the debtor. The firm is holding a $10,000 retainer.

According to a list of TriDimension's largest unsecured creditors, the company owes nearly $15,600 to Natchez, La.-based firm Gwin, Lewis & Punches, which is one of several local businesses immediately affected by the bankruptcy filing.


We just couldn't help ourselves with this one. On a day when some of our office mates are preoccupied with the playoff fate of their beloved Boston Celtics, news broke that the man who once led the team to the 2002 Eastern Conference Finals had quietly filed for bankruptcy in Miami on May 18.

Despite making $110 million during his playing career, Antoine Walker has had his fair share of financial troubles. Walker was forced to file for Chapter 7 after being hit with a $2.3 million foreclosure suit on a mansion he bought for his mother in suburban Chicago, according to Crain's Chicago Business. Walker, 33, listed assets of nearly $4.3 million and liabilities of $12.7 million in his Chapter 7 filing.

Among Walker's many creditors are his agent Mark Bartelstein--owed $458,366--and a $750,000 restitution payment to the Clark County district attorney's office in Las Vegas, where Walker was arrested last year for writing bad checks. Walker owes the Harrah's casino in Las Vegas and Ameristar Casino in East Chicago, Ind., $770,000 and $500,000, respectively. Walker also lists $646,900 in gambling losses from 2008 and 2009.

Walker has hired Arthur Spector, a partner at Berger Singerman in Boca Raton and a former federal bankruptcy judge, as his bankruptcy counsel. Spector stated in court filings that he's been paid $20,000 for his services, at least $10,000 of which is being paid by Charlotte Bobcats center Nazr Mohammed, a fellow Chicagoan and former college teammate of Walker's at the University of Kentucky.

Walker also owes $5,500 to Chicago firm Duggan Bertsch. Last month former NBA star Derrick Coleman also filed for bankruptcy, citing a series of bad business decisions.

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