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Blackstone Group LP is aiming to control the restructuring of hotel owner Highland Hospitality Corp. after purchasing a key slice of Highland's debt from Wachovia Corp., according to people familiar with the matter.
Blackstone's move comes as Highland, a real estate investment trust that owns 27 hotels, is struggling to restructure its $1.7 billion debt load amid the worst downturn for the hotel industry in decades. The slice bought by Blackstone, with a face value of about $320 million, is the most senior of Highland's mezzanine debt, giving Blackstone a significant say in how any restructuring unfolds, people familiar with the matter said.
Highland took on the debt when private-equity firm J.E. Robert Cos., or JER, bought the chain at the top of the market in 2007, borrowing to finance most of the purchase. JER now is trying to restructure the debt as hotel values have plummeted, hiring Lazard Ltd. and Weil Gotschal & Manges LLP as advisors in that effort, according to people familiar with the matter.
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Source - WSJ
