Hilton Seeks to Refinance a Big Chunk of Its Debt Well Before IPO
Blackstone has greatly improved Hilton’s operations since it was acquired, but with $15 billion in debt, the hotel chain has a weight around its neck.
Hilton Worldwide Holdings Inc., the hotel operator owned by Blackstone Group LP, set the rate on $5.85 billion of loans it’s seeking to refinance debt, according to a person with knowledge of the transaction.
A $5 billion portion that matures in seven years may pay interest at 3.25 percentage points to 3.5 percentage points more than the London interbank offered rate, according to the person, who asked not to be identified because terms aren’t set. An $850 million component coming due in five years is being offered at 3 percentage points more than Libor, with both pieces having a 1 percent minimum on the lending benchmark, the person said.
The covenant-light financing, meaning there are no financial-maintenance requirements, is being arranged by. Deutsche Bank AG, Bank of America Corp., JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. The transaction also includes a $1 billion revolving credit facility and commitments are due by Sept. 26, according to the person.
The seven-year portion is being offered to lenders at 99 cents on the dollar, while the $850 million tranche is being offered at 99.5 cents, the person said. Debt offered below par reduces proceeds for the company and increases yield for investors.
The world’s largest hotel chain filed to raise $1.25 billion in an initial public offering, proceeds of which would pay down borrowings, according to a Sept. 12 regulatory filing. Hilton also plans to issue $3.25 billion of bonds in a three- part offering and $3.5 billion of commercial mortgage backed securities, according to a statement from Standard & Poor’s today.
The McLean, Virginia-based company was acquired by private- equity firm Blackstone Group LP in 2007 for $26 billion, including debt. The company’s borrowings exceeded $15 billion as of June 30, according to its Sept. 12 filing.
–With assistance from Jeannine Amodeo in New York. Editors: Chapin Wright, Faris Khan
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