Two years after buying the Extended Stay America hotel chain out of bankruptcy, Centerbridge Partners, Paulson & Co. and Blackstone Group are preparing to sell $3.5 billion in total debt to refinance the 663-hotel chain that they bought in 2010. The group plans to pocket about $700 million of the proceeds and use most of the rest to replace existing debt.
The Extended Stay buyout group is planning to raise $2.5 billion through the commercial-mortgage-backed securities market, an important source of real-estate finance that has rebounded in the past year. The group also is hoping to capitalize on the growing demand for high-yield debt by raising $1 billion in so-called mezzanine debt, which is a riskier investment because it is backed by the owners' equity rather than the properties themselves. Deutsche Bank, J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Citigroup and Bank of America Merrill Lynch have been approached about buying junior pieces of this mezzanine debt, according to three people briefed on the deal.The trio purchased Extended Stay for roughly $4.2 billion after prevailing at a May 2010 bankruptcy auction over a group led by Starwood Capital. The buyers then financed their purchase partly with $2.7 billion of debt and put in about $1.5 billion in equity.Overall, the U.S. extended-stay hotel market has rebounded strongly since 2010. Nightly revenue per room at such hotels increased by 14.3% to $61.36 on average in the first nine months of this year from the same period in 2010.
United-States
