A typical Extended Stay asset

NEW YORK  CITY-Three investment firms that bought Extended Stay Hotels in a 2010 bankruptcy auction plan to sell $3.5 billion of debt to refinance their purchase. Blackstone Group LP, Centerbridge Partners and Paulson & Co. will recoup about half of their equity investment, sources told Bloomberg News.

Blackstone previously purchased the hotel chain in 2004 for $3 billion, when it was known as Extended Stay America. The group has invested about $420 million in renovations and to consolidate the properties under the Extended Stay name.

The buyout group plans to raise $2.5 billion through the CMBS market, the Wall Street Journal reports. The group also hopes to raise $1 billion in “mezzanine” debt, which is considered a riskier investment, according to the report.

Deutsche Bank, J.P. Morgan Chase, Goldman Sachs, Citigroup and Bank of America Merrill Lynch have been approached about buying pieces of the mezzanine debt, the paper reports.