You cannot have escape the news that Blackstone is readying to ditch its Hilton investment and is preparing for an early 2014 IPO. This has been all over the financial press and tv channels in the past couple of days. There are good articles about this on WSJ (here) and NYT (here).
Blackstone is a private equity firm that took Hilton private back in 2007 and saddled the hotel company with debt. This is the method for “private equity” firms to basically make the firms to pay for their takeovers.
Hilton had to restructure its debt back in 2010 and according to WSJ Blackstone had to write down the value of its Hilton investments by billions of dollars.
One part of bringing the liabilities down and readying for the IP, was likely the restructuring of the Hilton HHonors program earlier this year. Loyalty programs need to assess the future liability for the points that they have issued that are not yet used. When they raise the number of points required for free nights or make redeeming more difficult, it lowers the future liability and company can likely record a paper gain.
Private equity and leveraged takeovers. Those were the topics in the business school. Saddle the company with the debt and hope for the best. At least Hilton didn’t go under, although they had to renegotiate the 20 billion dollar debt load at one time.