Bernanke's policy helps "the economy".
http://online.wsj.com/article/SB10001424....Bankers are set to launch the biggest commercial-real-estate debt deal since the financial crisis began, people familiar with the matter said. The offering will allow two Wall Street firms to sell loans tied to the boom-time buyout of Hilton Worldwide and signals a thawing in one of the most troubled financial markets.
The $3 billion offering is expected to be followed by a $2 billion deal involving the Extended Stay Inc. hotel chain that recently exited bankruptcy, people familiar with the transactions said. Together, the deals would be by far the largest issuance of commercial mortgage-backed securities, or CMBS, since the downturn and the most vivid sign to date of a resurgent CMBS market.
The Hilton deal stems from Blackstone Group LP's $26 billion purchase of the hotel chain in October 2007. Banks, including Goldman Sachs Group Inc. and Bank of America Corp., provided $20 billion in financing but were stuck holding the loans when debt markets froze. The sale, expected in the next two weeks, will allow the two banks to sell the $3 billion in senior debt they still hold.
The offering likely will leave the banks whole on their investments, which few would have predicted during the crisis when the loans were trading as low as 70 cents on the dollar, people familiar with the matter said.
Representatives at Goldman, Bank of America and Blackstone declined to comment.
Demand for both deals is expected to be strong, as both companies have reduced their debt levels significantly, according to some potential investors.
Blackstone completed restructuring Hilton in April, cutting its $20 billion debt load by nearly $4 billion. Under that plan, Blackstone bought back $1.8 billion of mezzanine, or junior, debt on Hilton for $800 million, converted $2.1 billion of other debt issues to preferred equity and extended the loan maturity to November 2015.
One beneficiary of the restructuring: the Federal Reserve. The Fed became Hilton's largest creditor in March 2008 when it assumed roughly $4 billion of Hilton debt from Bear Stearns Cos. to broker the sale of the collapsed investment bank to J.P. Morgan Chase & Co.
As part of the restructuring, the Fed sold $320 million of the mezzanine debt back to Blackstone for about $180 million. The Fed took the loss upfront in the expectation that it would be made whole on its holdings of Hilton debt, in large part because the restructuring boosted the value of Hilton's existing debt. The Fed likely will fully recoup its Hilton debt holdings.
The restructuring also put Hilton on stronger ground as the debt markets healed. The CMBS market is opening up to properties with low or reduced debt levels as investors seek higher yields than offered by government or corporate debt.
"Investors are prepared to venture back," said Mark Landau, head of commercial real-estate banking in the Americas at Deutsche Bank AG.
The $2 billion bond offering on Extended Stay fits that mold.
J.P. Morgan and Deutsche Bank are planning to sell the loan it provided to a group led by Centerbridge Partners LP, Paulson & Co. and Blackstone to finance its $3.9 billion purchase of Extended Stay out of bankruptcy-court protection. The deal is expected to be sold by the end of this month, according to people familiar with the matter.
Since late last year, Wall Street has sold some $5 billion of CMBS, an amount that pales next to the $230 billion of CMBS issuance in 2007, the record year for the market. But it still amounts to a turnaround from the past two years, when new deals came to a virtual halt as the CMBS market seized up during the credit crisis.
For Wall Street, the CMBS deals mean the return to a possibly lucrative business. In 2007, banks earned $530 million in fees on CMBS issuance, according to data provider Dealogic.
Legal chicanery and beneficent darkness are the banker's stoutest allies - F.Pecora.
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