Extended Stay backs new proposed offer – source

* Centerbridge/Paulson proposed rival offer -source

* Auction for Extended Stay to happen in May – source

By Megan Davies

NEW YORK, April 4 (BestGrowthStock) – U.S. hotels firm Extended
Stay is favoring a new planned bid for it from investment
companies Centerbridge Partners and Paulson & Co over a rival
one on the table from a group led by Starwood Capital Group, a
source familiar with the situation said on Sunday.

The Starwood-led group had agreed to invest up to $905
million in Extended Stay America [ESAIN.UL] as part of a
reorganization proposal to bring the hotel chain out of
bankruptcy protection.

The Centerbridge/Paulson bid is slightly better
economically than the Starwood one, the source said, although
the details of what made the bid superior were not clear.

The Wall Street Journal, which earlier reported the
developments, said the Centerbridge/Paulson group had promised
not to charge fees.

However, the situation could change again, as an auction
will be held in May for the hotel chain, the source said.

It was not possible to leave a message at offices for
Paulson or Extended Stay outside business hours. Centerbridge
could not immediately be reached for comment. Starwood declined
to comment.

Extended Stay was bought in June 2007 by an investor group
led by David Lichtenstein’s Lightstone Group. It was forced
into bankruptcy last year after its projected cash flows
declined amid the recession and it could not keep servicing
more than $7 billion in debt.

In February, Centerbridge and Paulson & Co agreed to invest
up to $450 million in the company once it exits Chapter 11.

However, Starwood Capital said in March it submitted a bid
which exceeded that offer, and the hotel firm switched its
support to that offer.
Investment Research

(Editing by Muralikumar Anantharaman)

Extended Stay backs new proposed offer – source