Hilton clinches deal to reduce debt by nearly $4b

Hilton Worldwide has completed a deal to reduce its debt by almost $4b and extend the maturity by two years.

The move, which extends the maturity until November 2015, reduces the Blackstone-owned company’s total debt by nearly $4b (£2.6b) to $16b (£10.4b).

The transaction was effected through the purchase and retirement of $1.8b (£1.17b) of debt and the conversion of $2.1b (£1.36b) of “junior mezzanine” debt to “preferred equity”.

Mezzanine debt ranks after other debts should a company fall into receivership or be closed. The loans, also known as subordinated loans, typically have a higher rate of interest than senior debt due to the increased inherent risk.

Preferred equity only takes into account the preferred stockholders, and disregards the common stockholders. It is equal to shareholders' equity minus common equity.

Blackstone, the world’s largest private-equity firm, bought Hilton in 2007 when the property market was at its peak and was believed to have been negotiating with lenders to cut the hotel chain’s debt by about $5b (£3.25b). 

Christopher Nassetta, president and chief executive of Hilton Worldwide, said: “This debt restructuring is another important step forward for the company, and I would like to thank all of our lenders as well as our investors, led by Blackstone, for their tremendous efforts in completing this transaction.”

Nassetta said Hilton Worldwide was now “positioned very well” to capitalise on the recovery in the hospitality industry.

 
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By Daniel Thomas

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