Hilton Hotels launches tender for $1.8 billion of notes

By Jennifer Chiou

New York, Sept. 12 - Hilton Hotels Corp. announced the start of a cash tender offer for $1.8 billion of securities.

Affected notes include the company's $400 million of 7 5/8% notes due May 15, 2008, $200 million of 7.2% notes due Dec. 15, 2009, $300 million of 8¼% notes due Feb. 15, 2011, $375 million of 7 5/8% notes due Dec. 1, 2012, $200 million of 7½% notes due Dec. 15, 2017 as well as the $200 million of 8% quarterly interest bonds due 2031 and the 61.72 billion Chilean pesos of 7.43% Chilean inflation-indexed notes due 2009.

The Beverly Hills, Calif., hospitality company is also soliciting consents to amend the note indentures to eliminate substantially all of the restrictive covenants, to eliminate certain events of default, to modify or eliminate covenants regarding consolidations, mergers and sale of assets and company reports and to modify or eliminate certain other provisions, including, without limitation, certain provisions relating to defeasance.

The offer is linked to the previously announced merger agreement providing for the acquisition of Hilton by BH Hotels LLC, which is controlled by investment funds affiliated with the Blackstone Group LP.

The consent deadline will be 5 p.m. ET on Sept. 25. The offer ends at 8 a.m. ET on Oct. 11.

For each $1,000 principal amount, Hilton will determine its payout using the a fixed spread of 50 basis points and the 3¾% Treasury due May 15, 2008 for the 7 5/8% notes, the 3½% Treasury due Dec. 15, 2009 for the 7.2% notes, the 5% Treasury due Feb. 15, 2011 for the 8¼% notes, the 4% Treasury due Nov. 15, 2012 for the 7 5/8% notes and the 8 7/8% Treasury due Aug. 15, 2017 for the 7½% notes.

Pricing will be set at 11 a.m. ET on Oct. 5.

For each $25.00 principal amount of 8% bonds, the company will pay $25.125.

For each 50,000 Chilean pesos original principal amount of 7.43% notes, the company will pay $119.53, which represents a price of $1,028.72 per $1,000 adjusted principal amount converted at the observed exchange rate on Sept. 11.

The payouts include consent payments of $1.00 per 8% bond, $3.00 per 7.43% note and $30.00 per $1,000 principal amount of the other notes.

Holders will also receive accrued interest up to the payment date.

Bear, Stearns & Co. Inc. (877 696-BEAR or call collect 212 272-5112) and UBS Investment Bank (888 719-4210 or call collect 203 719-4210) are the dealer managers.

Banc of America Securities LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley & Co. Inc. are also acting as dealer managers and solicitation agents.

Global Bondholder Services Corp. (866 924-2200 or call collect 212 430-3774) is the information agent.

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