In an escalating battle over the largest U.S. hotel bankruptcy, a group of creditors led by Starwood Capital Group is trying to wrest control of the bankruptcy of Extended Stay Inc., people familiar with the matter said. The investor group -- including Fortress Investment Group LLC, D.E. Shaw Group and Five Mile Capital Partners LLC -- is proposing to buy Extended Stay's $4.1 billion first mortgage, which was carved up into commercial-mortgage-backed securities, or CMBS, for $3.5 billion, these people say. The offer calls for the group to put in more than $700 million in new equity and most of the existing bondholders to continue holding their debt, known in financial circles as "rolling" their positions.

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