Will The Hilton Buyout Bury Blackstone?
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The massive 26 billion dollar buyout of Hilton Hotels Corporation by the Blackstone Group was seen as a coupe for the private equity company.
One year later it already is hurting earnings for Blackstone and creating havoc for the company. The company may have seen all of it’s equity wiped out in the one deal as the hotel sector has plummeted.
The one hope is that the hotel sector will turn up before the 20 billion dollars in debt that Blackstone is holding comes due. Presently the 1.3 billion in interest that is due yearly in the deal is covered by Hilton’s earnings, but analysts are seeing a steep drop in those earnings as the hotel industry is facing a downturn. The big question is whether Blackstone in this period of falling commercial real estate is strong enough to absorb negative cash flow from the Hilton acquisition.
The sharp downturn in the hotel market — with more hotel owners and operators posting dismal results and giving dour forecasts — is making that deal look like a burden for Blackstone, which sank $6 billion of equity into the acquisition. That was the biggest equity investment ever made by the 23-year-old firm founded by Stephen A. Schwarzman and Peter G. Peterson, and some analysts believe much, if not all, of that equity has been wiped out, at least on paper. via WSJ.com.
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