From: Reuters
Published December 20, 2007 02:04 AM

Blackstone plans $9 billion Hilton CMBS offer in Q1

NEW YORK (Reuters) - The Blackstone Group LP <BX.N> is planning a $9 billion commercial mortgage-backed securities offering backed by Hilton Hotels next quarter, according to a Credit Suisse research note.

The deal would be the largest ever CMBS issue, according to analysts. Blackstone completed its acquisition of Hilton for $20 billion plus debt in October. Hilton's brands include Hilton, Embassy Suites and the Waldorf-Astoria Collection.

The offering is being led by Bear Stearns Co Inc <BSC.N>, Bank of America Corp <BAC.N>, Deutsche Bank AG <DBKGn.DE>, Goldman Sachs Group Inc <GS.N> and Morgan Stanley <MS.N>, according to the Credit Suisse note.

Blackstone and Bear Stearns did not immediately return calls for comment.

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The deal would top some $35 billion in issuance expected in the first quarter, coming off a slowdown in the current quarter, as credit concerns curb investor interest and dealers struggle to sell loans made under loose underwriting standards.

If successful, the offering would be an encouraging sign for buyouts awaiting CMBS financing. Nursing home operator Manor Care Inc <HCR.N>, which agreed to be acquired for $4.9 billion plus debt by the Carlyle Group <CYL.UL> earlier this year, is also slated to sell $3 billion in CMBS next quarter, according to the note.

The deals will face credit markets that have been upended in the past six months after subprime and structured securities created billions of dollars in losses for investors and Wall Street firms.

CMBS, while shrinking in volume, are expected to maintain liquidity in 2008 as credit quality holds up relative to the crisis in residential real estate, analysts said. Delinquencies due to slack underwriting and a slowing economy are seen rising to 1 percent from about 0.32 percent, short of the 16 percent rate in subprime home loans.

Blackstone in June sold a $6.9 billion CMBS issue to help finance its $39 billion purchase of Equity Office Properties Trust in February. It was the second-largest CMBS issue next to a $7.9 billion deal from Wachovia Securities in March.

(Reporting by Al Yoon and Jonathan Keehner; Editing by Andre Grenon)

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