This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

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

Stocks in this article: BXMAR

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)-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

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,719.00 +33.27 0.19%
S&P 500 2,052.75 +4.03 0.20%
NASDAQ 4,701.8670 +26.1550 0.56%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs