Hilton plans debt financing ahead of reported IPO

Owner Blackstone Group hires four banks for $13bn debt restructure

Image for illustration purposes only.
Image for illustration purposes only.

Hilton Worldwide Inc., the hotel operator owned by Blackstone Group LP (BX), hired four banks for a $13 billion debt refinancing later this year in anticipation of going public in early 2014, according to a person with knowledge of the matter.

The hotelier, based in McLean, Virginia, hired Deutsche Bank AG, Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley for the refinancing as well as the initial public offering, said the person, who asked not to be identified because the information is private. The refinancing would encompass bank debt, commercial mortgage-backed securities, high-yield bonds and time-share financing, the person said.

Blackstone’s 2007 takeover of Hilton for $26 billion, which included debt, was the largest ever of a hotel company, according to data compiled by Bloomberg.

The transaction took place at the height of the biggest buyout boom in history, amid a surge in commercial real estate values. With hotel stocks close to a five-year high and revenue and profits growing industrywide, investors are taking advantage of the rally to sell assets.

“Hilton is an extremely good family of brands and there have been a lot of changes since Blackstone bought it,” including new managers, said Kevin Mallory, global head of CBRE Hotels, the lodging-specialty practice of real estate brokerage CBRE Group Inc.

“This is a lean, aggressive brand machine at this point, with top-notch management. They’ll be priced aggressively and I would be shocked if this were anything other than oversubscribed.”

In 2010, during the credit crisis, Hilton reduced its borrowings by almost $4 billion by buying back some debt and converting other loans to preferred equity. The company also pushed back debt maturities to November 2015 and, under new chief executive officer Christopher Nassetta, boosted its hotel count to more than 4000 properties from 2900.
“You’ve got some of the smartest people involved on both the Blackstone side and the Hilton side,” Mallory said. “They did weather the storm.”

Representatives at Goldman Sachs, Bank of America, Deutsche Bank and Morgan Stanley declined to comment on the Hilton plans. Peter Rose, a spokesman for Blackstone, also declined to comment. The Wall Street Journal previously reported that Hilton hired the banks for an IPO.

Blackstone, the world’s largest buyout firm, also is working on an IPO for its La Quinta hotel chain, a person with knowledge of the matter said earlier this week. Blackstone hired JPMorgan Chase & Co. and Morgan Stanley to explore a sale or IPO of La Quinta, the person said. Blackstone shares fell 1.7 percent yesterday to $22.76 in New York.

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