RBS agrees to bankroll UK hotel deals, but holds onto assets

By Bridging Loan Directory -

RBS, the partly state-owned UK bank, has agreed deals to refinance two significant UK hotel portfolios – and held onto the assets according to IP Real Estate.

West Register, an RBS subsidiary focused on distressed assets, has acquired a 24-hotel portfolio for €40m via Jupiter Hotels, a joint venture set up for the purpose with private equity firm Patron Capital.

The portfolio of branded hotels has languished in RBS’s restructuring unit since owner Jarvis defaulted on its original RBS loan 18 months ago.

Patron Capital, which acquires operating companies underpinned by real estate, usually buys hotels and leisure and healthcare assets outright as a sole investor, or at most with additional investment from management teams.

In this case, RBS’s restructuring unit, though not Jarvis’s other bank lenders, wanted to retain its equity in the hotel firm – hence the joint venture.

A separate refinancing deal will give the 26-asset Malmaison boutique hotel portfolio an extension on its £282.5m (€329.5m) loan facility to the end of 2014.

One of the participants in the loan agreement is Riverland, linked with RBSM Investments, an RBS subsidiary that is also a 17.5% shareholder in Malmaison parent group MWB.

Under the terms of an agreement, Riverland will provide a £33.3m third tranche at an annual interest rate of 5% above LIBOR to January 2013 and a £20m mezzanine facility from then to December 2014.

MWB said the deal would give the firm a “more robust, less leveraged capital structure”.

It has agreed to pay an increased preferred return to RBSM Investments in exchange for 100% of the future value of the business.

Related-party regulations will mean the refinancing package – which will also include £100m raised from a recently announced de-leveraging sale-and-leaseback agreement covering five assets – will need to go to a shareholder vote.

MWB says it has already secured approval for the deal from more than 50% of investors in the firm.