NY Fed 'loses $180m on Hilton debt sale'

7 October 2010

The Federal Reserve Bank of New York (NY Fed) has lost about $180 million in a sale of debt it holds in hotel group Hilton, which is owned by buy-out fund Blackstone.

Around $320 million of its Hilton debt was sold back to Blackstone, but insiders told the Financial Times that the NY Fed may yet be able to break even on its stake in Hilton because of better terms on other sections of the arrears.

The bank inherited $4 billion worth of the $20 billion debt used to buy Hilton in 2007, when it took on $29 billion of troubled assets from investment bank Bear Stearns.

Earlier this year, Blackstone negotiated a deal to buy back $1.8 billion of Hilton's debts with $800 million, leading to a 56 per cent loss for the NY Fed and other lenders which accepted the terms.

In a recent speech by NY Fed executive vice president Brian Sack, the official noted that decisions on the Federal Reserve's balance sheet will be dependent on the economic outlook for the US.

By Gary Cooper

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