Business Matters
Refinancing Calculating
the IndustryWide Impact How have the restructurings that have occurred to date impacted the various stakeholders in the hotel sector? Hotel & Catering Review reports on a recent presentation by restructuring and recovery specialist Aiden Murphy, who is a Partner with Crowe Horwath.
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hotel & catering review
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wenty months on from the first ‘Time to Invest’ conference, a follow-on conference organised by the Irish Hotels Federation was held recently in the Clyde Court Hotel Dublin. Key topics presented by industry professionals included progress made to date, the challenges remaining, and the changed ownership and operational landscape that is emerging. The conference was addressed by an economist, property agent, banker, stockbroker, and funders and accountants who provided specialist advice to hoteliers, as well as by a hotelier who has had firsthand experience of a successful refinance. A number of recurring themes emerged from the IHF conference and these will, no doubt, shape the thinking, strategies and actions of both lenders and borrowers, whether they are existing hotel owners or those seeking to acquire, expand or restructure. Aiden Murphy was invited back as a speaker to outline how the restructuring that has taken place to date has been impacting the various stakeholders in the hotel sector. Aiden also reviewed transactional activity, refinancing from exiting banks to new banks, and the restructuring of over indebted loans for existing customers of banks who remain committed to the Irish economy. There are at least 200 hotels
out of 900 Irish hotels, circa 23%, which still need to be recycled from their existing lender to a new funder or new owner as the lender closes down their loan books. Aiden provided a snapshot of the imbalance between those hotels where their funders wished to exit the underlying loan and the appetite from the remaining banks – AIB, Bank of Ireland and Ulster Bank – to provide replacement funding. This imbalance is creating the need for financial institutions such as NAMA and BOSI to include hotels in more general property loan portfolio sales. The desire to speed up activity has created opportunities for groups with funding available. Dalata Hotel Group, with equity capital of a235,000 and with potential to borrow a165m, have a warchest of a400m and the capacity to buy upwards of 30 hotels in a short space of time. Other groups, including Brehon Capital and iNua Partnership, remain active while others such as Ostán Capital Partners appear to be gearing up. These funds represent a change in ownership that is likely to have a preferred operational approach. These factors are changing the ownership landscape for hotels and moving it towards a more investment-led and return model. The purchase of hotel loans by loan acquisition specialists creates an opportunity for individual hoteliers to conclude
a refinance deal which may not have been possible with their existing lender. The loan portfolio purchasing groups such as Lone Star, Car Val and Blackstone will have an
2012
2014
Total Outstanding Loans to the Hotel Sector
€6.7bn
€5.3bn
Number of Hotels Requiring Refinancing from Exiting Banks
300
300
% of Hotels Requiring Refinancing
33%
23%
Source: Crowe Horwath