Blackstone, Hilton Lenders Agree on Debt

NEW YORK (Reuters) – Private equity giant Blackstone Group (BX.N) has come to an agreement to restructure its Hilton hotels chain debt, a source familiar with the situation said on Friday.

The agreement with Hilton’s lenders would cut about $4 billion of debt at the hotel firm, the source said. The news was first reported by the Wall Street Journal.

Private equity firms have struggled to keep debt-laden portfolio companies healthy as the financial crisis took its toll on employment and demand.

The $26 billion deal to buy Hilton was struck at the peak of the buyout bubble in July 2007 and was financed with $20.6 billion of debt and about $5.7 billion of equity.

The hotel market, however, was hit badly by the economic crisis as consumers and businesses cut back on travel. While business travel has improved in the past months, it is below levels of 2008 and earlier.

Rival Marriott International Inc (MAR.N) said earlier this month it would be difficult to predict the pace of recovery for the hotel industry, although its profits beat expectations.

Starwood Hotels & Resorts (HOT.N) and Wyndham Worldwide (WYN.N), also reported results that beat Wall Street estimates, showing that bookings have strengthened in recent months.

Blackstone has been in talks to cut Hilton’s debt for some months. A source previously said that the company was weighing putting in $800 million of fresh equity.

The Wall Street Journal said that Blackstone’s funds would contribute that $800 million to buy back debt at a discount, and would extend the maturity of some debt issues.

The source who spoke to Reuters declined to be identified because the talks are not public. (Editing by Marguerita Choy)