Hilton Worldwide Seeking $12.6 Billion in Debt Ahead of IPO

Hilton Worldwide Holdings Inc., the hotel operator owned by Blackstone Group LP, is planning to borrow $12.6 billion and use the money along with the proceeds from an initial public offering to refinance debt.

The world’s largest hotel chain is seeking to raise $5.85 billion of loans and sell $3.25 billion of bonds and $3.5 billion of commercial mortgage-backed securities, according to a statement from Standard & Poor’s. Hilton plans to raise $1.25 billion in an IPO, according to a Sept. 12 regulatory filing.

Blackstone’s 2007 leveraged buyout of Hilton for $26 billion was the largest ever of a hotel company, Bloomberg data show. The McLean, Virginia-based company had $15.1 billion in total debt as of June 30, according to its Sept. 12 filing.

“Since the LBO was announced in July 2007, the underlying fundamentals have substantially improved, with Hilton’s performance exceeding that of peers,” Chris Snow, an analyst at debt-research firm CreditSights Inc., said in a Sept. 13 report. “The challenged leveraged buyout is poised to return to the public market with a high, but manageable, degree of financial risk.”

Term Loans

A $5 billion loan 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 data compiled by Bloomberg. 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.

Hilton will issue $1.25 billion in eight-year senior secured notes and $2 billion of senior unsecured notes due in 2021 and 2023, S&P said in today’s statement.

The covenant-light loan 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 loan is being offered to lenders at 99 cents on the dollar, while the $850 million piece is being offered at 99.5 cents, the person said. Debt offered below par reduces proceeds for the company and increases yield for investors.

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