Hilton Hotels which was taken private by Blackstone (NYSE:BX) several years ago in an incredibly debt laden deal is looking to issue some $1.25 Billion in common shares and get the stock trading again. Proceeds will go to pay down existing indebtedness and general working capital.
So basically investors are trading debt dollars for equity dollars without changing anything in the business. The debt holders are looking for some pay-down to get out of nose bleed territory.
The investors who are stepping up to the bat are foolish. Enterprise risk remains the same. The capital will not be a driver for wealth creation. Blackstone is just paying down its debt.
Smart Blackstone. Stupid investors. If you want to get in on hotels and commercial properties there are lots of better ways than to be dazzled by an excellent marketing brand with an over levered balance sheet.
George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti