Blackstone slices $4bn off Hilton debt

The New York-based firm has helped Hilton buy back $1.8bn of debt and convert $2.1bn of junior mezzanine debt into preferred equity.

The Blackstone Group has reduced the Hilton hotel chain’s debt by $4 billion and pushed debt maturities by two years to the end of 2015.

Hilton Worldwide said in a statement it had bought back $1.8 million of debt and converted $2.1 billion of junior mezzanine debt to preferred equity. The restructuring has allowed Hilton to push back debt maturities by about two years to November 2015.

It was unclear whether Blackstone injected fresh equity into the deal. A Bloomberg report in February suggested the New York-based private equity and real estate giant was considering pumping in $800 million to repay part of the debt. Hilton and Blackstone spokesmen both declined to comment.

Blackstone acquired the global hotel group in 2007 for $26 billion, financing the deal using $20.6 billion of debt and $5.7 billion of equity, according to a statement announcing the closing of the deal in October 2007. The equity is split across Blackstone’s private equity and real estate vehicles.

Hilton said at the time of the transaction that the $20.6 billion of mortgage and mezzanine debt was secured by “substantially all of Hilton's consolidated assets”.

Financing was provided at the time by Bear Stearns, Bank of America, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley. Roughly $4 billion of Hilton debt is held by the Federal Reserve, through a fund called Maiden Lane, which acquired the position from Bear Stearns Cos. when it brokered the collapsed investment bank's sale to JPMorgan Chase, according to the Wall Street Journal.