The Blackstone Group is spinning off a minority ownership stake in Hilton Worldwide Holdings in a proposed initial public offering of common stock that could raise up to $1.5 billion.
As a part of the strategy, Blackstone would also restructure a portion of Hilton’s debt through a CMBS offering that could go as high as $3.5 billion - potentially the second largest CMBS offering in the U.S. (Goldman Sachs put together a $3.66 billion CMBS deal at the last peak of the market in 2007).
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The number of shares to be offered and the price range for the proposed Hilton Worldwide offering have not yet been determined. Deutsche Bank Securities Inc., Goldman, Sachs & Co., BofA Merrill Lynch, and Morgan Stanley & Co. LLC are acting as the joint book-running managers for the offering.
At $27 billion in assets, Hilton Worldwide is one of the largest and fastest growing hospitality companies in the world, representing a chain of 4,041 hotels, resorts and timeshare properties comprising 665,667 rooms in 90 countries and territories. It owns or holds lease interests in 157 of those hotels.
Its premier brand portfolio includes luxury hotel brands Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts. Its full-service hotel brands are DoubleTree and Embassy Suites Hotels, and its focused-service hotel brands are Hilton Garden Inn, Hampton Inn, Homewood Suites and Home2 Suites. In addition Hilton owns a timeshare brand, Hilton Grand Vacations.
Prior to undertaking the public offering, Blackstone expects to close on a number of refinancing transactions, including entering into a multi-billion dollar new senior secured credit facilities; a private placement of a multi-billion dollar senior notes and first priority senior secured notes; and entering into a multi-million dollar bank loan secured by its Waldorf-Astoria New York property.
The refinancing catching the most attention though is the potential issuance of multi-billion dollar commercial mortgage-backed securities offering.
The offering would be backed by loans securing 23 hotels owned by the Hilton-affiliated CMBS borrowers. The CMBS loan is expected to have both a fixed-rate and floating-rate component.
Blackstone followed a similar strategy with its Extended Stay America hotel chain, putting together a $2.5 billion CMBS deal before registering to sell shares of the chain in a public offering. Extended Stay’s IPO is still in the registration process.
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