This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Singapore Bets on Blackstone's Hilton IPO After 2010 Debt Restructuring

Updated from 8:07 a.m. ET to reflect MLV & Co. analyst comments.

NEW YORK (TheStreet) -- Singapore's sovereign wealth fund GIC Private Ltd pumped equity into Blackstone Group (BX - Get Report)-owned Hilton Worldwide when the company needed to restructure its debt in the credit crunch that ensued after the hotel chain's 2007 leveraged buyout. Now, GIC is prepared to hold onto a large chunk of Hilton Worldwide shares as the company moves towards an initial public offering.

In contrast to GIC, other providers of emergency relief to Hilton during its debt restructuring will be cashing out of their holdings in the company's IPO. GIC is poised to be a 5% stakeholder in Hilton when the company lists its shares, in what could be a $2.4 billion IPO that would be the biggest in the U.S. hotel industry.

According to IPO documents, GIC is expected to own roughly 49.5 million shares in the company shares, or about 5% of the McLean, Va.-hotelier's outstanding stock.

That stake may underscore the Singaporean fund's ties to Blackstone and its white-knuckle Hilton investment. GIC is also is an owner of franchised Hilton hotels, after acquiring three Waldorf-Astoria branded hotels in March and appears to be an active investor in franchised hotel properties across the U.S.

"It is not atypical for them," Ryan Meliker, a senior analyst at boutique investment bank MLV & Co. said of GIC's Hilton investment. The sovereign wealth fund is a major holder of U.S. real estate and lodging properties franchised by the likes of Marriott, Hyatt and Starwood.

GIC's stake is disclosed as "HHotels Mezz Debt Private Limited" in S-1 filings with the Securities and Exchange Commission and is related to Hilton's debt refinancing efforts.

In April 2010, Hilton Worldwide restructured $4 billion in combined senior mortgage loans and secured mezzanine loans.

The firm restructured its debt through the repurchase of $1.8 billion in secured mezzanine debt for a cash payment of $819 million, a 54% discount to par value, according to SEC filings. The cash payment from Hilton's parent, The Blackstone Group, the documents said. Hilton also extinguished roughly $2 billion in junior mezzanine debt by converting it into preferred equity.

Hilton recognized a $789 million gain on its debt restructuring efforts by the end of 2010.

Those, like GIC, who invested in Hilton as it worked to restructure its debt were given the option to either cash out of their holdings at the company's initial public offering or retain a common stock interest in the hotel chain.

While GIC will hold a 5% stake in Hilton, there will be some participants in the debt restructuring that opt for a cash payment.

Hilton's IPO prospectus states that the company expects to sell about 64.1 million shares to public stock investors, while a selling stockholder will offer an additional 48.7 million shares. Contrary to some media reports, that selling shareholder, referenced to as "Hilton Global Holdings LLC" won't be The Blackstone Group. The identity of all selling shareholders could not be determined.

"The members of Hilton Global Holdings LLC that have elected to receive a cash payment are former lenders to us (or their transferees) who received their interests in Hilton Global Holdings LLC as part of our 2010 debt restructuring," Hilton states in its IPO filing.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
BX $41.74 0.00%
MAR $80.96 0.00%
AAPL $128.95 0.00%
FB $78.99 0.00%
GOOG $537.90 0.00%

Markets

DOW 18,024.06 +183.54 1.03%
S&P 500 2,108.29 +22.78 1.09%
NASDAQ 5,005.3910 +63.9670 1.29%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs