They don't just "seem" to be paying the interest, I can give testimony that they "are" paying the interest. I think Hilton, within itself, has significant positive cash flow and is one of a number of cash cows for BX.
I own the Hilton HLNQ bonds and they pay interest quarterly, collected my last one in November and should be receiving the next one in mid Feb. If one examines the Hilton Hotel website, look at each of its franchisees and google their activity. What you will determine is that the franchisees continue to grow globally, which pay Hilton Hotels franchise fees. Also noteworthy is that through 9/30/08, BX reported HLN had double digit gains in revenue/earnings and ample liquidity to pay bonds per the WSJ.
The negatives are that Hilton is privately held so doesn't report. We know they are heavily leveraged and there is a cloud surrounding BX, which, at least in mind, the dividend of BX is likely to be cut or eliminated. That having been said BX remains rated strong financially by the analysts and the losses are paper writedowns and not liquidity nor solvency issues.
HLNQ is the remainder of a $200 million issue several years ago, that were not redeemed by holders. These were tendered during the BX takeover and an estimated $80 million remain. With few shares outstanding, the lack of obvious transparency, few are either aware or interested in them. The return approaches 40% annually at current prices and are as good a bet as any.
Thanks for the detailed update - it seems to me that I will hold my bonds - at this point, there is really no downside for me. There are some very good bargains out there if one has the stomach to hold these days. . .ten years from now we will look back and say, "shoulda woulda coulda"