About $150 million of Hilton Hotels Corp.'s $5.5 billion credit backing the hotel chain's acquisition of Hilton Group exchanged hands on its break in the secondary market last week. A trader said he was surprised so much of the credit traded given its LIBOR spread. "Since they had committed to a deal with a low coupon, we were expecting a lot to hang on to it," he said. The term loan "B" is priced at LIBOR plus 1 5/8%, while the term loan "A" is priced at LIBOR plus 1 1/2%. The $2 billion term loan "A" and $750 million term loan "B" broke just north of par. The "B" loan then rallied to 100 1/2. The deal also consists of a $2.75 billion revolver, also priced at LIBOR plus 1 1/2%.
Moody's Investors Service assigned a Ba2 rating to the bank facilities. In January, the ratings agency downgraded the ratings of Hilton Hotels to Ba2 from Ba3 because of the higher leverage at the company after the acquisition. Hilton's bonds will share the same guarantees and stock pledges that are expected to be provided to the new bank facilities so that no structural subordination will exist in its capital structure, according to Moody's.
The agency also says in the release that although the company will sell assets to reduce leverage, the uncertainty over the timing of the sales contributed to the downgrade. It adds that an increase in business travel and stable economic conditions in the hotel sector is positive for the company's credit outlook. Officials at Hilton Hotels did not return calls.