A £1.1 billion (€1.2 billion; $1.7 billion) portfolio of Marriott hotels bought in 2007 has gone into receivership.
Ernst & Young has been appointed receiver to 42 UK hotels as vendor and lender on the original deal, Royal Bank of Scotland, said it had taken control of the assets.
The original investment was reported to have been made by Quinlan Private – since renamed Avestus Capital – and a consortium led by clients of Igal Ahouvi; Electra, First International Bank of Israel and Delek Real Estate. Quinlan reportedly put in 44 percent of the £200 million of equity used to buy the portfolio.
According to reports, RBS had been working on a debt-for-equity swap relating to around £700 million of loans used to help finance the deal, but on Tuesday night appointed Ernst & Young as receivers to Professional Ventures Corp, a British Virgin Islands-based holding company created by the investors.
“Marriott will continue to operate the hotels and this decision will not affect customers, suppliers or employees of the hotels,” said joint-receiver Roy Bailey.
RBS owns the majority of the debt associated with the 2007 deal, but there is also an additional loan originally owned by Lehman Brothers that was subsequently bought by the hedge fund investor, York Capital, which complicated matters.
The portfolio includes the Marriott Country Hall on London’s South Bank. The properties are operated by Marriott International under a 30-year management agreements that commenced in 2006.
Ernst & Young will appoint a board of directors to take charge of the properties, which will be chaired by Steve Bodger, a consultant with Alchemy, the private equity group.
Yesterday the Irish Times reported the decision by RBS had “blindsided” Avestus.
It said Avestus clients invested £92 million in the hotels through a Cypriot-registered vehicle called Weldana Ltd. Early on Tuesday afternoon the newspaper said investors were updated on the financial restructuring relating to the hotels that had been under way for more than a year.
“Since our last update, on 28th April, there have not been any significant developments in respect of the debt restructuring,” Avestus partner Thomas Dowd reported to clients.
“To date, it appears that RBS has declined to negotiate with the hedge fund which bought out the Lehman debt position. We do not believe that either party will allow the status quo to continue, and we would expect that sooner or later the parties will attempt to move matters forward.”
“In recent days, RBS have agreed to a call with the shareholders and we expect this to happen in the coming days, after which we hope the level of engagement may pick up.”
He warned that Weldona was “likely to find itself marginalised” and it would be “difficult to negotiate with credibility” if it didn’t contribute to the cost of the restructuring process, reported the Irish Times.