NEW YORK CITY-In advance of taking Hilton Hotels Corp. public again in 2014, the Blackstone Group is planning to refinance all $13.5 billion of Hilton's debt. The Wall Street Journal reported Wednesday that the private equity giant plans a $3.5-billion CMBS issue as part of that refi initiative, which would represent the largest such issue since before the capital markets crisis of 2008.
Even so, the WSJ reported, the new CMBS issue is a fraction of the size of the $8.4-billion one that Blackstone planned in '08. That deal was scrapped after, among other things, the collapse in March of that year of Bear Stearns, the lead manager of the deal.
“It wasn't easy to get people interested in this deal because of its size and complexity,” David Rodgers, who worked on the '08 deal as head of Merrill Lynch & Co.'s CMBS group, told the WSJ. Yet he added, “We would've gotten this deal done, and probably made money on it, were it not for the credit crisis.”
Blackstone, which acquired Hilton in 2007 for $18 billion plus $7 billion in assumed debt, managed in 2010 to cut a deal that pared the hotelier's debt by nearly $4 billion and extended the due date on nearly all existing financial obligations to 2015. Blackstone has since paid down about $3 billion more, leaving $13.5 billion on the Hilton portfolio.
Citing a source familiar with the deal, the WSJ said Blackstone's new CMBS issue on behalf of Hilton will be collateralized by some two dozen properties and will be sold as a combination of fixed- and floating-rate debt. Blackstone has selected Deutsche Bank, Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley and J.P. Morgan Chase & Co. as managers of the CMBS issue, which could be sold before year-end. Click here for the complete article.
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