14. Read over the attached article titled \"Lightstone Chief Defends a Bankruptcy.\" The rst sentence of this article states that a court ordered David Lichtenstein to pay lenders $100 million. This penalty relates to: a. ling for Involuntary Bankruptcy issue b. a Preferential Transfer issue 0. a contract issue (:1. an Automatic Stay issue 6. Exemptions issue THE WALL STREET JOURNAL. THE PROPERTY REPORT: Lightstone Chief Defends a Bankruptcy Court Has Ordered Lichtenstein to Pay $100 Million Penalty for Placing Extended Stay in Chapter 1I Protection BY KRIS HUDSON Real-estate investor David Li- chtenstein, who faces a court or- der to pay lenders a $100 million penalty for his 2009 decision to put his Extended Stay hotel chain into bankruptcy, says he's being branded the bad boy for doing the right thing. In his first interview since a EXTENDEDSTAY July ruling in New York State Supreme Court, Mr. Lichtenstein DELUXEHOTE owner of Lightstone Group, said earlier this month he had been ready to forfeit the debt-laden hotel chain to a group of its mortgage holders in 2009, but a lawsuit filed by junior lenders left him little choice but to place Extended Stay under Chapter 1I bankruptcy protection. Among the biggest real-estate David Lichtenstein bankruptcies of its time, Ex- tended Stay collapsed under the ership stake in Extended Stay. debt from its $8 billion, top-of- "The assets would have done the-market buyout in 2007. better outside of bankruptcy," Lightstone appeared to have sur- said Monty Bennett, chief execu- vived relatively unscathed, hav- tive of Ashford, which held a ing contributed only $200 mil- $164 million slice of Extended lion in equity. Stay's mezzanine debt, in an in- However, the July court rul- terview. "He chose bankruptcy ing found that Mr. Lichtenstein, so that he could keep the hotels, by putting Extended Stay into cut some of the debt and retain bankruptcy, had violated a term his ownership position." of his mortgages on the imilarly, the trustee's lawsuit chain dictating face a $100 he would million penalty if he A San Rafael, Callf, hotel In 2009 by owner Lightstone Group accuses Mr. Lichtenstein of cut- ting a deal to preserve some of took actions that hurt the lend- to covering operating expenses. his equity and extricate Light- ers' collateral, such as seeking "At the end of the day, nobody ing by Mr. Lichtenstein and most the ruling, but it already has Bank of America Corp., Wacho- stone from the bad-boy clause. bankruptcy protection. Mr. Lich- cares how much you tried, wh of the other lenders in the case. been painful for the 50-year-old via Corp, Ashford Hospitality tenstein is appealing the ruling. the deal was, or if you were a The bad-boy provision began Brooklyn native, who built Li appearing in contracts in the stone Group into an empire of - Trust and others. Mr. Lichtenstein denies the al- . legations, saying only the Bank The case has become a major good guy or a bad guy," Mr. Li- 1990s to prevent borrowers from apartm By early 2009, when it be- came clear the chain wouldn't be of America-led lenders were test of the so-called bad-boy chtenstein said in the interview. 5, shopping centers willing to shoulder the costs of clause, more formally known as abusing the process to fend off the personal guarantee provi- creditors, even when prop tels. He has liquidated in- able to service its debt, Mr. Lich- vestments and laid off employ- tenstein began negotiating with taking over Extended Stay. Some lenders agree with Mr. sion, under which borrowers can Extended Stay's are well under water. E be held liable for a voluntary the clause says that' c ees. He declines to say how . groups of lenders on s itors many he has laid off. possible resolutions, veral chtenstein. Michael DeMarco, a ding managing director with Fortress bankruptcy filing. The clause is collapse was among can sue borrowers for some-or considered one of the most im- all-of the debt if they put prop- "I'm saddened because I think to Mr. Lichtenstein the biggest real-estate erties into bankruptcy. we were almost the perfect bor- Investment Group LLC in 2009, cords. He opted for a plan.pro- said in court papers that Mr. Li- portant lender protections in rower [in] the way we treated posed by creditors led by Bank commercial mortgage-backed se- bankruptcies. The provision wasn't applied the banks in trying to work it chtenstein "did the only respon curities and other real-estate often in the headier times of the out," he said in the interview. of America under which he sible thing [he] could have done would forfeit the chain to them. to avoid waste of Extended loans because it is the last line real-estate boom, But, since the . The case dates back to 2007 recession, courts generally have Some junior lenders, include Stay's assets by ceasing opera- of defense against bankruptcy. Mr. Lichtenstein's explanation upheld it, with the ruling ag when Lightstone acquired Ex- ing Ashford Hospitality Trust, tended Stay from Blackstone say that they offered alternative tions." Mr. Lichtenstein said that if is disputed by lenders Ashford Mr. Lichtenstein the marquee ex- Last year, a group led by Cen- he hadn't put the 660-hotel Hospitality Trust, Line Trust ample. Group LP for $8 billion. The p chain into bankruptcy, it would Corp., Deuce Properties Ltd. highly leveraged deal was fi- plans that also would have kept terbridge Partners LP purchased "People are much more likely nanced with $7.4 billion in the chain out of bankruptcy and the chain at auction for $3.9 bil- have run out of money and be- and the court-appointed litiga- now to believe that guarantees thus kept their claims from be- lion. Mr. Lichtenstein says that gun to lay off thousands of em- ' -'tion trust trustee, Hobart Trues- are enforceable," says David secur ing wiped out. They say Mr. Li- this price tag, which was 40%% ployees. In contrast, bankruptcy dell, represented by law firm Forti, a partner at law firm anoth nstein instead opted for more than the chain's appraised judges can allow debtors to di- Baker & Hostetler LLP, who filed Dechert LLP. bankruptcy in the hope that he value when Extended Stay vert money from debt payments a suit June 14 alleging wrongdo- nine loans, which is debt junior could strike a deal in court for sought bankruptcy, also justified Mr. Lichtenstein is appealing to the first mortgages, held by Lightstone to keep a small own- his move