Hilton Worlwide's much-anticipated $3.5 billion CMBS hit the primary pipeline this week.

The JP Morgan, Deutsche Bank-led deal is the largest commercial mortgage backed securitization since the downturn and is part of the hotel operator's broader debt refinancing in preparation for an initial public stock offering.

The deal, Hilton USA Trust 2013-HLT's issuance is backed by first mortgage liens or deed of trust liens on the borrowers' fee and leasehold interests in 23 full-service and limited-service hotels; all furniture, fixtures, and equipment and personal property owned by the borrowers used to operate the properties; and all reserves, escrows, and deposit accounts maintained by each borrower.

Standard & Poor’s has assigned preliminary ratings to 13 classes of notes.

The deal is structured with an $875 million floating-rate component with an initial term of two years and a fully extended maturity of five years, and a $2.625 billion fixed-rate component with a term of five years.

“The transaction has a unique structure in that the two loan components have different terms, and principal prepayments may be distributed to subordinate floating-rate classes despite their lower payment priority relative to more highly rated fixed-rate classes,” according to the S&P presale report.

The issuer first filed a registration statement on Sept. 25 with the U.S. Securities and Exchange Commission.

The Nov. timing for the deal is good because spreads on new issues have come in over the last 60 days, according to Manus Clancy a senior managing director at Trepp. In September when the issuer first filed its prospectus with SEC, the market was dogged by concerns regarding tapering and the debt ceiling deal.  “Both are behind us now,” said Clancy.

Hilton's deal, along with the $867 million CGCMT 2013-GC17 CMBS conduit announced earlier in the week puts the private label CMBS market on track to surpass $75 billion compared to $45 billion issued last year, according to figures reported by Barclays.

Hilton Worldwide is one of the largest hospitality companies in the world, with 4,041 hotels, resorts and timeshare properties comprising 665,667 rooms in 90 countries and territories. The company, which was taken private by the Blackstone Group in 2007, is refinancing its debt in preparation for a planned IPO. In September it issued $7.5 billion of loans and $1.5 billion of bonds.

Hilton USA Trust 2013-HLT

Class  Preliminary rating(i)  amount ($)

A-FL           AAA  (sf)      393,000,000

X-FL           BB  (sf)        875,000,000

B-FL           AA- (sf)       123,000,000

C-FL           A- (sf)         93,000,000

D-FL          BBB- (sf)      99,000,000

E-FL           BB (sf)        167,000,000

A-FX         AAA (sf)       1,179,000,000

X-1FX        A- (sf)         1,723,000,000 (ii)

X-2FX        A- (sf)         1,723,000,000 (ii)

B-FX         AA- (sf)        369,000,000

C-FX         A- (sf)          280,000,000

D-FX         BBB- (sf)       338,000,000

E-FX          BB (sf)          459,000,000

(ii) indicates notional balance

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