BANKRUPTCY WEEK AHEAD:Extended Stay Seeks Bankruptcy Exit Approval

16th Jul 2010 17:12

By Marie Beaudette Of DOW JONES DAILY BANKRUPTCY REVIEW On Tuesday, hotel operator Extended Stay Inc. will ask the Manhattan bankruptcy court in New York to sign off on its Chapter 11 restructuring plan, which is based on an investment deal with Centerbridge Partners LP, Paulson & Co. and other investors. The plan would transfer ownership of the 680-hotel chain to the investors in exchange for $3.9 billion, which would be used to repay Extended Stay's mortgage lenders, owed $4.1 billion. The company's unsecured creditors, owed $3 billion, would get a stake in a litigation trust. The U.S. Justice Department, however, has said the litigation trust is likely to have little value because Extended Stay's Chapter 11 plan would shield its current owner, David Lichtenstein's Lightstone Group, from litigation. The U.S. trustee, the arm of the Justice Department that monitors bankruptcy cases, said Extended Stay's plan is "unconfirmable" because of the lawsuit releases it offers third parties, including Lichtenstein. The plan may also face opposition from Extended Stay's unsecured creditors, who were siding with Starwood Capital Group in a rival bid for the company. Extended Stay, based in Spartanburg, S.C., filed for bankruptcy protection in June 2009 to reshuffle the debt it took on as part of Lightstone's $8 billion leveraged buyout of the hotel operator from Blackstone Group LP (BX). Chemtura Corp. (CEMJQ), on Wednesday, will ask the Manhattan bankruptcy court for permission to send its bankruptcy-exit plan to creditors for a vote. The plan would repay in full the chemical company's lenders and unsecured creditors and allow shareholders to keep a small slice of the company's equity. The Chapter 11 plan would cut the company's debt load to $750 million from $1.37 billion. Upon its exit from bankruptcy, Chemtura says it will have an enterprise value of $2.05 billion. Under the proposed plan, Chemtura's lenders will be paid in cash and unsecured creditors, including bondholders owed $1.02 billion, will share at least 95% of the reorganized company's stock and an undetermined cash payment. Chemtura's existing stock will be canceled, but current shareholders will receive 5% of the new company's equity and the opportunity to buy $100 million in additional stock through a rights offering if they vote to approve the plan. Chemtura, which filed for bankruptcy protection in March 2009, said it will seek to raise about $750 million in new debt through a combination of loans and bonds to fund its exit from Chapter 11 protection. The company, based in Middlebury, Conn., manufactures specialty chemicals, including agriculture, pool, spa and home care products. On Thursday, General Growth Properties Inc. (GGP) will ask the Manhattan bankruptcy court for approval to replace its $400 million bankruptcy loan with new financing the mall operator said will save it millions on interest each month. Barclays Bank PLC (BCS, BARC.LN) has agreed to provide the financing, which would replace a loan from a group of lenders led by Farallon Capital Management LLC. The loan, which would mature on May 16, 2011, includes an 8% interest-rate reduction over the earlier loan, which will save the company $2.7 million a month. General Growth, which owns or manages more than 200 U.S. shopping malls, filed for bankruptcy protection in April 2009. The company plans to exit Chapter 11 protection later this year under a plan backed by a group of investors led by Brookfield Asset Management Inc. (BAM, BAM.A.T). The investors have agreed to pump $8.55 billion in General Growth, which would be split into two public companies upon its exit from Chapter 11 protection. One of the companies will get General Growth's more than 180 shopping malls, while the other will serve as a holding company for real-estate properties such as master-planned communities and mixed-use projects. (This item appears in Dow Jones' Daily Bankruptcy Review newsletter.) -By Marie Beaudette, Dow Jones Daily Bankruptcy Review; 202-862-1354 (END) Dow Jones Newswires July 16, 2010 12:12 ET (16:12 GMT)