The Manhattan court ruled today that U.S. Bancorp, a trustee for senior debt holders in Extended Stay, has standing to pursue its suit, disagreeing with state Supreme Court Justice Melvin Schweitzer, who dismissed the case in 2011.
U.S. Bancorp sought to be paid ahead of junior lenders to the hotel firm out of a $100 million pot personally guaranteed by Lightstone and its founder David Lichtenstein. Junior lenders have also claimed rights to the funds, according to the appeals court’s decision.
“There are provisions in the various agreements, all of which were executed on the same day, that are not fully consistent with each other,” the appellate panel said in the ruling.
Lightstone bought Charlotte, North Carolina-based Extended Stay, which controlled a group of more than 600 hotels, in 2007. The company filed for bankruptcy protection in 2009.
A group of investors including Centerbridge Partners LP, acquired the company out of bankruptcy in 2010.
Senior debt holders, which were owed $4.1 billion, received $3.9 billion from the sale, according to Schweitzer’s 2011 opinion. Junior debt holders, which were owed $3.3 billion, received nothing, according to the opinion.
David Friedman, a lawyer representing Lightstone and Lichtenstein, didn’t immediately return a call seeking comment on the ruling.
The case is U.S. Bank NA v. Lightstone Holdings LLC, 651951-2010, New York State Supreme Court (Manhattan).
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