Hilton Commercial Mortgage Bonds Said to Be Marketed by JPMorgan

Banks led by JPMorgan Chase & Co. are marketing $3.5 billion of commercial-mortgage bonds tied to Hilton Worldwide Inc. as Blackstone Group LP prepares to take the hotelier public, people with knowledge of the offering said.

The largest such transaction since the credit crisis is linked to 23 properties across the U.S., said the people, who asked not to be identified because terms aren’t public. JPMorgan is working with Deutsche Bank AG, Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley to arrange the sale.

The Hilton deal comes with sales of securities linked to commercial real estate loans poised to surpass $70 billion in 2013, more than double the volume in 2012, according to data compiled by Bloomberg. The commercial-mortgage securities are enabling Blackstone, the world’s largest private-equity firm, to pay down a portion $13.4 billion in debt refinanced in October, deal documents show.

The 2007 takeover of Hilton for $26 billion was the largest ever for a hotel company, Bloomberg data show.

Blackstone restructured the debt in April 2010, reducing its debt load by $4 billion and pushing back maturities to 2015, as consumers and businesses cut back on travel amid the economic downturn.

Seven months later, Bank of America and Goldman Sachs sought to sell about $3 billion of the restructured debt in a commercial-mortgage bond deal. The transaction was cut in half when investors demanded additional yield to buy the securities, prompting Goldman to pull its portion of the sale, people with knowledge of the deal said at the time.

Real estate investors are cashing in on hotels as values climb along with occupancy and room rates. Prices for hospitality properties in non-major markets, which excludes the largest U.S. cities such as New York, have climbed 28.3 percent over the last 12 months, according to Moody’s Investors Service.

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