In July 2007, Blackstone took Hilton private for $26 billion. On Monday, Hilton IPO’d at $20 a share. Using the same measure to value the company as when Blackstone acquired it, Hilton’s enterprise value is now $32 billion. That’s $6 billion above Blackstone’s takeover price.So it’s a bit confusing to read that Blackstone has an made an $8.5 billion profit on its investment in Hilton.

Here’s how Blackstone, in Matt Levine’s words, “made more on Hilton, in dollar terms, than Hilton has made itself”.

Step 1: Acquire using some equity, and a lot more debt

Blackstone and its investors bought Hilton for $5.7 billion in equity. They also borrowed $13 billion and agreed to take on $7 billion of Hilton’s already existing debt. Equity plus debt minus cash held by the company, what’s called enterprise value, is how you get that $26 billion takeover cost.

This is the essence of the private equity model: buy a company with some equity, and a lot more debt; Blackstone owns the equity, and the lenders own the debt.

Step 2: Restructure, and survive some very bad years for the hotels business

Almost as soon as Blackstone bought Hilton, pretty much everything started going bad. First came the financial crisis, which arguably started one month after the acquisition. Then the hotel business tanked.