Extended Stay Hotels Inc. announced Thursday that it has will take an investment offer worth up to $905 million from a group led by Starwood Capital Group in order to exit bankruptcy, according to Associated Press.

The company had an earlier proposal from Centerbridge Partners and Paulson & Co.

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The hotel chain said that the proposal from Starwood, TPG Capital and Five Mile Capital Partners would value it at about $3.9 billion after the deal closes. It also said the deal would strengthen its balance sheet, lower its debt to $2.8 billion from $7.4 billion and provide cash reserves that would be infused into its properties and operations.

Extended Stay said its board deemed the Starwood Capital-led offer as "superior" to its prior deal with Centerbridge and Paulson & Co. That agreement has been terminated.

Private equity firm Starwood Capital was founded and is controlled by hotel magnate Barry Sternlicht, the founder and former chairman and CEO of hotel company Starwood Hotels & Resorts Inc. (NYSE: HOT). He would serve as Extended Stay's chairman.

The Starwood Capital-led offer includes a $450 million equity investment and a $255 million cash option for creditors that want cash instead of equity. The group also agreed to backstop a $200 million equity rights offering.

Starwood affiliates will provide about half of the new equity, with TPG Capital, the buyout arm of private investment firm TPG, and Five Mile affiliates providing the rest.

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