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Blackstone denies Hilton split rumours

12 August 2009 by
Blackstone denies Hilton split rumours

Hilton's private equity owner, the Blackstone Group, has denied rumours that the hotel giant is to be broken up in a bid to realise its value.

A spokesman for Blackstone said the plans, reported last week in the Independent, were "categorically untrue". However, speculation remains rife as to how the private equity firm can claw back its lost value ahead of its repayment deadlines in three or four years.

Blackstone, which bought Hilton Hotels at the peak of the market for $26b (£15.5b) in 2007, recently wrote down the value of its investment by 50%, although some analysts questioned whether even this was enough.

Despite the denials of the split, it has been widely recognised that Blackstone will have to consider carefully what options will provide the best return on its investment. This may include public listings for parts of the chain along regional lines, debt-for-equity swaps with lenders, or trade sales of packages of hotels to rivals.

Talking to Caterer, Clive Hillier, chief executive of Vision Asset Management, said Blackstone will be looking at ways of generating equity, in view of the strong challenge it will face in refinancing the very large amount of debt.

"Even if the cost of the debt has subsided significantly from when the original deal was struck, the banks will almost certainly be looking for a higher level of equity in any refinancing," he said.

Hillier warned that the biggest challenge for Blackstone will be in finding elements that could be broken off from Hilton.

"The major chunks of sale-and-leaseback (or manage-back) have already been undertaken. None of the nascent Hilton brands yet seem well enough established to carry a real brand value, so it's difficult to see where the next stash of ‘crown jewels' is hidden," he said.

Stephen Broome, director of hospitality and leisure at PricewaterhouseCoopers, commented: "It is perfectly possible that greater value could be obtained in a break-up. Global hotel brand-owning competitors will no doubt already be eyeing up the possibilities and opportunities to acquire assets or brands currently owned by Blackstone."

Hilton is the hospitality leader in the UK business superbrands list >>

Blackstone writes down nearly half its investment in Hilton >>

Starwood accuses Hilton of theft of trade secrets >>

Blackstone to buy Hilton for nearly £10b >>

By Emily Manson

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