The world has changed. Where does that leave Hilton Hotels? Blackstone announced a buy-out in June at the top of the private equity boom. The deal gave the US group an enterprise value of $26bn and left it with $20bn of net debt. With quoted hotel stocks crashing, it is a good time to revisit the economics of the transaction.

Hilton's interest rate hovers around 5.7 per cent, implying about $1.14bn in annual net interest costs. Internal projections call for earnings before interest, tax, depreciation and amortisation to hit $2bn in 2008. Given Hilton's asset-light strategy of franchising and managing hotels, annual capital expenditure of $500m seems fair, leaving more than adequate cash flow to cover interest costs. The bulk of the net debt is covered by bank loans with a maturity of at least three years. The banks continue to have some success at syndicating this.