Blackstone plans $13 bn debt refinancing for Hilton Worldwide ahead of IPO

08 Aug 2013


US private equity firm Blackstone Group, owner of Hilton Worldwide Inc, is planning a $13 billion refinancing of its debt ahead of the listing of the world's largest hotel chain in early 2014.

Hilton hotelHilton Worldwide Inc, the hotel operator owned by Blackstone Group LP, has hired four banks for the $13 billion debt refinancing due later this year, reports quoting industry sources said.

New York-based Blackstone has tapped Deutsche Bank, Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley as the main underwriters for the initial public offer (IPO), which is slated to be launched in the first few months of next year, the Wall Street Journal (WSJ) yesterday reported, citing people familiar with the matter.

The paper said that it was not clear what kind of valuation Blackstone would seek or how much of its stake it would sell, but the tapped banks are expected to refinance Hilton's $13 billion debt prior to the IPO.

The news comes a day after the WSJ reported that Blackstone had hired JPMorgan Chase & Co and Morgan Stanley to explore a sale or IPO of hotel chain La Quinta Inns & Suites, valued at around $4.5 billion. (See: Blackstone explores sale or IPO of budget hotel chain La Quinta Inns & Suites)

It has also filed with regulators for an IPO for hotel chain Extended Stay America Inc, which it had acquired in 2010 in partnership with Centerbridge Partners and Paulson & Co, for about $3.9 billion.

Blackstone had acquired Hilton just before the global financial crisis in 2007 for $26.9-billion in cash, including assumption of debt of about $7.5 billion.

It is the largest purchase of a hotel chain by a private equity firm and Blackstone's biggest investment in one property to date.

Since the deal was struck on the eve of the global financial crisis, many analysts had then opined that Blackstone might not get a return on its investment.

Blackstone's funds and co-investors had invested about $5.6 billion through equity and had borrowed $20 billion from a consortium of seven banks to fund the acquisition.

The acquisition had come two years after Hilton Hotels Corporation merged its sister company in the UK with Hilton International, in a $6-billion deal that split off Ladbrokes, the UK bookmaker, into a stand-alone company.

But, barely six months into the acquisition, the global hotel industry went into a downward spin reeling first from the global financial crisis and later from the recession, and Blackstone is reported to have at one point, recorded a paper loss of two-thirds of its $5.6 billion equity investment in the hotel chain.

In February 2010, Blackstone reached a deal with lenders to restructure Hilton's debt by several billion dollars. (See: Blackstone cuts deal to restructure Hilton Hotels debt)

Post recession, Hilton, like other hotel chains, have flourished, and Blackstone's CEO Stephen Schwarzman said during the firm's second-quarter earnings call that Hilton's profits has risen by 17 per cent for the first half of the year.

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