Private equity firm Blackstone Group LP
Blackstone has been in talks to cut Hilton's debt for some months. The private equity firm purchased the hotel group in July 2007 in a deal financed with $20.6 billion of debt and $5.7 billion of equity at the peak of the buyout bubble.
The hotel market was hit hard by the economic crisis as consumers and businesses cut back on travel. While business travel has improved in recent months, it is below levels of 2008 and earlier.
Absent a near-term restructuring of the loans, the mortgage borrowers and the mezzanine borrowers may be unable to satisfy their financial obligations under the loans, Lehman Bros Holding Inc
Under the restructuring, the mortgage loan and the senior mezzanine loans could be extended by two years. Junior mezzanine loans would be converted to about $2 billion of preferred equity, Lehman said.
In addition, Blackstone would contribute $800 million to repay a portion of the debt.
Lehman said it holds a small fraction of the total debt proposed to be restructured, and it has asked the court's permission to participate in the restructuring.
(Reporting by Chelsea Emery; editing by John Wallace)