Blackstone now is using the same formula to convince creditors holding debt on other hotel investments by the firm, some likely worth less than their overall debt, to do similar restructuring deals.
Blackstone already has gone into the market and purchased junior, or "mezzanine," debt on these deals at a discount. The firm wants to retire that debt, and then convince the remaining mortgage holders to extend their loans' due dates in exchange for Blackstone paying a slice of the principal—usually about 5%—plus a small fee or higher interest rate.
The tactic is a reminder of the power that well-capitalized private-equity firms have in restructuring talks with lenders, particularly if they are willing to use their balance sheets. That gives them the power to go into the market and buy debt on their potentially stressed deals that already have been written down.
Moreover, the end game for some of Blackstone's hotel investments is likely an initial public offering. So far, though, that market remains unproven. Two hotel owners have sought IPOs of shares this year with tepid results.
About
The Blackstone Group L.P. (Blackstone) is a manager of private capital and provider of financial advisory services. Blackstone is an independent manager of private capital with assets under management of $128.1 billion, as of December 31, 2010.
http://online.wsj.com/article
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