GALVESTON — Tilman Fertitta picked a strange time to launch a $1 billion effort to take Landry’s Restaurants Inc. private.

When Fertitta, CEO of the publicly traded restaurant and casino operator, made the bid, credit markets already were bruised and battered. The situation has only gotten worse.

The island native made the bid as economists were fretting about a recession and lenders, wary of a collapsing mortgage-backed securities market and turmoil in financial services, were clamping off the flow of cheap and easy money that had fueled buyouts and acquisitions in recent years.

In fact, Fertitta’s Jan. 28 proposal to buy Houston-based Landry’s, which has invested nearly $150 million on restaurants and entertainment venues in Galveston County, came as private equity group Blackstone’s $6.4 billion bid to buy Alliance Data Systems, a Dallas-based credit-card transaction processor, was coming undone and other buyout deals had or were in jeopardy of tanking.

The same day Fertitta made his offer, Harrah’s Entertainment Inc. announced the completion of the $17.1 billion acquisition that took the world’s largest casino operator private. But a few days later, banks were struggling to syndicate and sell the loans and bonds used to finance the buyout, according to reports.

Fertitta said last week he was prevented from commenting on the offer while an independent committee appointed by Landry’s board reviews it. All he’s said about the financing is that he’s confident he can get it.

Steve Scheinthal, Landry’s executive vice president and general counsel, said Fertitta would never have made an offer if he didn’t think he could get the financing.

“It’s certainly gotten tougher since the time that he made the offer,” Scheinthal said. “However, I think he still feels confident that he can secure financing coupled with the equity he intends to put in to finance this transaction.”

Fertitta owns 39 percent of Landry’s. He’s offering $23.50 a share to stockholders, a 41 percent premium over the close of $16.67 on the Friday before his Monday announcement.

The total transaction, which includes nearly $900 million in debt, is valued at about $1.3 billion.

William W. Hamilton, an analyst with SMH Capital, estimates Fertitta would have to raise about $235 million to buy the outstanding shares. Fertitta also would have to refinance some debt, including $400 million in unsecured senior notes.

Fertitta would use his existing equity ownership, along with additional cash equity, to finance the transaction, Landry’s officials say. He would borrow from various financial institutions to make up the balance needed to consummate the deal, Landry’s officials have said.

“These are difficult and uncertain times,” said Hamilton, who disclosed that an SMH Capital employee serves on Landry’s board. “People are requiring a bit more return for the capital risk they’re taking.”

Still, Fertitta’s large ownership stake gives him an advantage, Hamilton said.

And commotion in the credit markets and the rising cost of capital could serve to dissuade counter offers, observers say.

A successful management buyout hinges on Fertitta’s banking and investor connections, observers say.

Last summer, as the credit markets were dissolving, Fertitta showed he had some pull with lenders.

He was in an acrimonious legal dispute with bondholders about Landry’s failure to promptly disclose financial information to the U.S. Securities and Exchange Commission while the company reviewed stock-option granting practices. No intentional wrongdoing was found, but the filing delay cost Landry’s $8 million more in yearly interest payments to reinstate the $400 million in bonds.

Landry’s managed to line up financing through Wachovia Corp. to use had it not been able to come to terms with bondholders.

“Landry’s has worked with banks over the years on many different occasions and definitely has some connections with banks and other investors as well,” Hamilton said.

Deals are doable and there’s money to be had, said Wes Marple, finance professor in the College of Business Administration at Northeastern University.

“The debt markets are in some turmoil, but a good deal can always get financing; bankers are awash in cash, but now they’re more cautious about where they put their cash, ” Marple said.

“Getting cash to fund this buyout is going to depend on his banking connections and their perception of the ability of his firm to service debt or to sell some pieces of the business that would allow him proceeds from sales to retire what they borrow.”

Mukesh Bajaj, a senior managing director of Emeryville, Calif.-based LECG, an analytical and consulting services firm, said leveraged buyout debt trading has declined in value.

Banks issue leveraged loans and sell them to investors. But investor interest has cooled.

Bajaj points to investor Sam Zell’s $12.7 billion leveraged buyout of Tribune Co. completed late last year. The loans and bonds to finance that transaction last week were trading for about 75 cents on the dollar, shaving $4 billion off the value of the media conglomerate since Dec. 20, according to a Los Angeles Business Journal report.

“Market capital is always available,” Bajaj said. “But given the market conditions, the deal has to be economically sensible.”

Possible skepticism about whether Fertitta can get financing might be why Landry’s stock hasn’t been trading much higher than $20 a share since he announced his bid, Hamilton said.

The fact that Fertitta announced his offer without securing financing isn’t unusual, said Robert Prentice, who teaches business law at the McCombs School of Business at the University of Texas at Austin.

Securing financing costs money, so it makes sense that Fertitta would wait until he had the deal approved before setting it up, Prentice said.

“It’s expensive to get financing lined up, so it’s not unusual,” he said.

While it’s a strange time for leveraged buyouts, it isn’t unusual that Fertitta would want to take his company private and delist from the stock exchange, experts say.

Fertitta is among a growing number of CEOs who want more flexibility to run their companies out of the gaze of public markets obsessed with short-term results. His very public fight with bondholders last summer and expensive post-Enron disclosure rules, including the Sarbanes Oxley Act of 2002, could be a driving force behind Fertitta’s bid, some observers have speculated. Others assert that companies go private to make dramatic structural changes that shareholders might hinder.

“I think he’s been frustrated by the depressed stock for a while, and maybe there’s some changes being talked about in terms of strategic opportunity with a private, versus public company,” Hamilton said.

Taking a public company private is a long, complicated process. Landry’s board has appointed a special committee, which is hiring legal and financial advisers to decide whether Fertitta’s offer is a good one for the public shareholders.

As the committee conducts a review, which could take anywhere from 60 days to 90 days, Fertitta will be working on a merger agreement in case the group decides the offer is fair.

A competing offer from a private equity firm is possible, and Fertitta is likely to make a counter offer, Hamilton has said. Shareholders must approve the transaction, a process that could take another two to three months.

Of Landry’s nearly 25,000 employees, more than 3,000 are in Galveston County. Landry’s owns 179 restaurants in 29 states, including Rainforest Cafe, Saltgrass Steakhouse and Landry’s Seafood House. The company also owns Golden Nugget Hotel and Casino in Las Vegas, San Luis Hotel & Resort in Galveston and Kemah Boardwalk, among other properties.

Fertitta is credited with growing the chain from a single restaurant in 1980.

In 2006, Landry’s posted a $21.8 million loss, related mostly to the sale of its Joe’s Crab Shack chain, on sales of $1.1 billion.

“If Tilman didn’t think he could get this deal done, he would never have submitted the offer to acquire the company,” Scheinthal said.