June 15 (Bloomberg) — Extended Stay Hotels, the operator of mid-priced hotels acquired at the peak of the commercial real estate market for $8 billion, filed for bankruptcy protection as the recession cut corporate and leisure travel.
The Spartanburg, South Carolina-based chain, with more than 680 properties in 44 states, collapsed two years after Lightstone Group LLC purchased the company with $7.4 billion in financing.
The company said it had $7.1 billion in assets and $7.6 billion in debts at the end of last year, according to papers filed today in U.S. Bankruptcy Court in New York.
Lightstone bought the chain from Blackstone Group LP in April 2007 in its first purchase in the lodging business.
Since then, prices have declined nationwide.
The U.S. hotel industry is enduring its ?weakest year on record,? according to PKF Hospitality Research.
U.S. hotel occupancy fell 14 percent in the week ended June 6 from a year earlier and average daily room rates were down 11 percent to $95.90, according to data from Smith Travel Service.
Blackstone?s Exit
Before Lightstone, Blackstone bought Extended Stay in 2004, when it had 425 hotels, for $2 billion and the assumption of $1.1 billion in debt.
It added properties through acquisitions.
The bankruptcy filing, by Extended Stay and 69 affiliates, follows a failed attempt by the company to restructure $3.3 billion in mezzanine debt.
A group of junior debt holders sued in New York and Texas state courts to block that deal.
Reduced travel prompted by the recession led Mariott International Inc., the biggest U.S. hotel chain, and Host Hotels & Resorts Inc., the largest U.S. lodging real-estate investment trust, to report first-quarter losses this year.
Extended Stay, through HVM, employs approximately 10,000, the company said in court filings. HVM said in its statement that Extended Stay guests remain for an average of 18 to 20 days, in contrast to a typical two- or three-day hotel stay.
The case is In re Extended Stay Inc., 09-13764, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Source:? Bob Van Voris and David M. Levitt? (2009). Extended Stay Chain Files for Bankruptcy, Hit by Debt, Bloomberg http://www.bloomberg.com/apps/news?pid=20601087&sid=aSSgPmHvUslUpublished Jun 15, 2009. Viewed June 16, 2009,