Extended Stay America completes tender for 9.15% and 9 7/8% notes

New York, May 11 - Extended Stay America Inc. (B2/BB-) said that it had completed its previously announced merger with an affiliate of The Blackstone Group and had also completed its related tender offers and consent solicitations for its 9.15% senior subordinated notes due 2008 and its 9 7/8% senior subordinated notes due 2011, which expired as scheduled at 8 a.m. ET on May 11, without extension.

The company said that as of that time, $169.1 million principal amount of the 9.15% notes had been tendered, or about 85% of the outstanding amount, and $291.851 million principal amount of the 9 7/8% notes, or about 97% of the outstanding amount, had been validly tendered by their holders and accepted for payment.

As previously announced, Extended Stay America, a Spartanburg, S.C.-based lodging company, said on March 31 that it had begun cash tender offers to purchase any and all of its outstanding 9.15% and 9 7/8% notes and was also seeking consents from the respective noteholders to proposed indenture amendments.

The company set consent deadlines of 5 p.m. ET on April 14 for its two offers and set 8 a.m. ET on May 11 as their respective expiration times, with each deadline subject to possible extension.

Extended Stay said the tender offers and consent solicitations were being conducted in connection with its previously announced agreement to merge with affiliates of The Blackstone Group.

The company said the amount to be paid for each validly tendered 9.15% note would be $1,035.50 per $1,000 principal amount of notes tendered and accepted for payment, which includes a $30 per $1,000 principal amount consent payment for noteholders tendering their notes, and thus delivering the related consents, by the consent deadline.

The company said that the amount to be paid for each validly tendered 9 7/8% note will be determined at 2 p.m. ET on the second business day immediately preceding the tender offer expiration (for a tentative pricing date of May 7). It said that the price would be determined by a formula based on a 50 basis point fixed spread over the yield at that time of the reference security, the 2% U.S. Treasury note due May 15, 2006. Total consideration for those notes would also include a $30 per $1,000 principal amount consent payment for holders tendering their notes and delivering their consents by the consent deadline.

Extended Stay said that holders tendering their 9.15% notes or 9 7/8% notes after the consent deadline but before the tender offer expires would not receive the consent payment. It said all tendering holders would also receive accrued and unpaid interest up to, but not including, the payment date for the notes.

The company said holders tendering their notes would be required to also consent to the proposed amendments to the respective note indentures, which would eliminate substantially all of the restrictive covenants contained in the indentures and shorten certain notice periods for the redemption of notes. It said holders could not tender their notes without also delivering consents or deliver consents without also tendering their notes.

The company said the tender offers and consent solicitations would be conditioned upon the now-fulfilled requirement that it receive consents sufficient to approve the proposed amendments. Another condition is that the previously announced merger with Blackstone's affiliates will have already occurred or will be occurring substantially concurrent with the tender offer expiration date.

On April 15, the company said that it had received the required amount of noteholder consents to the proposed indenture amendments by the consent deadline for each offer, which had expired as scheduled at 5 p.m. ET April 14, without extension; as of that time, it had received tenders and consents from holders of in excess of 83% of its 9.15% notes and in excess of 95% of its 9 7/8% notes.

Extended Stay said that it would, as soon as practicable, execute supplemental indentures governing the two series of notes that would incorporate the previously announced indenture changes. The company said that although the supplemental indentures would be executed as soon as practicable, the amendments would not become operative until immediately prior to the company's pending merger with affiliates of The Blackstone Group, provided that all validly tendered notes were accepted for purchase upon consummation of the merger.

Bear, Stearns & Co. Inc. and Morgan Stanley & Co. Inc. were the dealer managers for the tender offers and solicitation agents for the consent solicitations (contact Bear Stearns at 877 696-BEAR; contact Morgan Stanley at 800 624-1808).

D.F. King & Co. Inc. is the information agent (bankers and brokers only call 212 269-5550; all others call 888 887-0082).

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