Can someone explain the financing of the Blackstone/Extended Stay deal?
june 16, 2009: "While Extended Stay, a hotel chain sold for $8 billion near the height of the private equity boom, has filed for bankruptcy, its private equity owner does not appear to have been scarred by the move.
According to The Wall Street Journal, Lightstone Group, which bought the chain from the Blackstone Group in April 2007, only paid $200 million in equity and borrowed a chunk of that for the deal."
only paid $200 million in equity in an $8 billion purchase? and borrowed a chunk OF THAT equity? very confusing.
from a NYT story in 2007: "Lightstone, based in Lakewood, N.J., will finance the purchase with $1 billion in cash and $7 billion in debt." further, "Blackstone will retain a 10 percent stake in the company, Lightstone’s chief executive, David Lichtenstein, said."
so when they paid $8 billion for the company, they were only buying 90% of the company, with blackstone still left holding a stake worth about $890 million?
from a reuters story yesterday: "Real estate investor Lightstone Group LLC borrowed $7.4 billion to buy 680-property Extended Stay from private-equity firm Blackstone Group LP in June 2007..."
i thought they only borrowed $7 billion, not $7.4 billion?
i'm sorry if these are retarded questions, but it's something i'm naturally curious about and i'm genuinely confused.
bump. anyone?
The exact terms and numerical figures of the deal is usually not specified in the media outlet, so basically you just have to be satisfied at getting the big pictures.
This is as far as I can see from the information:
$8b deal; $7b debt + $1b equity. Out of which, Lightstone probably invested $200m of their own capital, and probably recruited several co-investor groups to invest along with them on the equity tranches (probably around $700m and they are probably passive investors who conceded the board control and all its relevant legal liability to Lightstone). Blackstone rolled over its 10% remaining stake roughly valued at $100m.
I think you will see the more detail about this deal through CapIQ.
Hope this helps.
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