Sample Transactions

“First aid” in the hotel industry


Project­ name

Hotel / 5 stars

Client

Inter­na­tio­nal banking consor­tium

Dura­tion

6 months

Task

Profi­ta­bi­lity analy­sis

Restruc­tu­ring

Tran­sac­tion prepa­ra­tion

Mode­ra­tion
20-year Management contract

Volu­me

EUR 60 million


Star­ting situa­tion: Hotel buil­ding owned by a non-EU company, here­di­tary lease­hold. Lease agree­ment with a fixed value with renow­ned hotel chain A. A has Management contract with hotel chain B, who has opera­ted the hotel under its brand name for around 40 years.

After a failure to reach agree­ment regar­ding the exten­sion of the contract, the owner termi­na­tes the lease agree­ment with opera­tor A in June effec­tive 31 Decem­ber of the same year, without a new rental / lease agree­ment with Management company B or alter­na­tive hotel company. As of Novem­ber, still no solu­tion from 1 Janu­ary of the follo­wing year, risk of closure of hotel opera­tion with 150 employees, loss of income source, risk of insol­vency on the part of the owner, reduc­tion of finan­cial assets to mini­mum level, lessor has right to termi­nate contract in the event of insol­vency. Exter­nal finan­cing by two foreign banks in excess of the market value of the property.

When Brüggemann GmbH took over the mandate, initial measu­res to remove the brand iden­tity and the logo from the hotel roof had been taken.

Mandate: Appoin­ted two months before the end of the year by foreign subsi­di­ary of a German bank to rescue the hotel opera­tion as the only source of income to cover its debt service claim.

Task: To esta­blish and analyse the causes, deve­lop stra­te­gic alter­na­ti­ves to the closure of opera­ti­ons, busi­ness conti­nua­tion concept with alter­na­ti­ves reviewed, standstill agree­ment reached with parties invol­ved, parties invol­ved convin­ced of busi­ness conti­nua­tion concept with their Advisory bodies, 150 hotel employees taken on by the owner as contrac­tual part­ner at the last minute on 31 Decem­ber, preli­mi­nary contract ente­red into with Management company B concerning conti­nua­tion of the Management services for 20 years. Valua­tion adjust­ment of the loan volume for senior and junior lenders mini­mi­sed.

Analy­sis: Risk of high value adjust­ment of the loans, total loss of equity. The Scan­di­na­vian owner lived in a non-EU coun­try. His owner company was a complex Swiss holding company with criti­cal econo­mic exis­tence.

Solu­tion: Inten­sive mode­ra­tion of nego­tia­ti­ons between the parties invol­ved, the hotel chains’ heads of deve­lop­ment in Germany and abroad, success­fully persua­ded former Management company B to enter into a Management contract directly with the owner and to agree on 20 years.

The owner had to expand its func­tion as a risk-free lessor to include the func­tion of the party directly invol­ved in the finan­cial risk as the hotel opera­tor. In this role, he took on the busi­ness risk of the hotel, but was able to mini­mise it to a large extent, since the Management func­tion was able to be handed over to inter­na­tio­nally renow­ned hotel chain B. The closure of the hotel was able to be preven­ted just a few hours before the dead­line of midnight on 31 Decem­ber, the opera­tio­nal trans­fer was success­ful.

In addi­tion, it was necessary that the capi­tal provi­ders assu­med a guaran­tee, in order to put the hotel opera­tor in a posi­tion to make the invest­ments that had been put off for several years. By reor­ga­ni­sing the rents and inte­rest char­ges in favour of the invest­ment, the threa­te­ned insol­vency was able to be avoided. This could only be achie­ved in the short time avail­able by making use of all time reser­ves. The project analy­sis, stee­ring and respon­si­bi­lity were taken on by our Senior Part­ner with expe­ri­ence in the hotel indus­try.


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Sample Transactions

“First aid” in the hotel industry


Project­ name

Hotel / 5 stars

Client

Inter­na­tio­nal banking consor­tium

Dura­tion

6 months

Task

Profi­ta­bi­lity analy­sis

Restruc­tu­ring

Tran­sac­tion prepa­ra­tion

Mode­ra­tion
20-year Management contract

Volu­me

EUR 60 million


Star­ting situa­tion: Hotel buil­ding owned by a non-EU company, here­di­tary lease­hold. Lease agree­ment with a fixed value with renow­ned hotel chain A. A has Management contract with hotel chain B, who has opera­ted the hotel under its brand name for around 40 years.

After a failure to reach agree­ment regar­ding the exten­sion of the contract, the owner termi­na­tes the lease agree­ment with opera­tor A in June effec­tive 31 Decem­ber of the same year, without a new rental / lease agree­ment with Management company B or alter­na­tive hotel company. As of Novem­ber, still no solu­tion from 1 Janu­ary of the follo­wing year, risk of closure of hotel opera­tion with 150 employees, loss of income source, risk of insol­vency on the part of the owner, reduc­tion of finan­cial assets to mini­mum level, lessor has right to termi­nate contract in the event of insol­vency. Exter­nal finan­cing by two foreign banks in excess of the market value of the property.

When Brüggemann GmbH took over the mandate, initial measu­res to remove the brand iden­tity and the logo from the hotel roof had been taken.

Mandate: Appoin­ted two months before the end of the year by foreign subsi­di­ary of a German bank to rescue the hotel opera­tion as the only source of income to cover its debt service claim.

Task: To esta­blish and analyse the causes, deve­lop stra­te­gic alter­na­ti­ves to the closure of opera­ti­ons, busi­ness conti­nua­tion concept with alter­na­ti­ves reviewed, standstill agree­ment reached with parties invol­ved, parties invol­ved convin­ced of busi­ness conti­nua­tion concept with their Advisory bodies, 150 hotel employees taken on by the owner as contrac­tual part­ner at the last minute on 31 Decem­ber, preli­mi­nary contract ente­red into with Management company B concerning conti­nua­tion of the Management services for 20 years. Valua­tion adjust­ment of the loan volume for senior and junior lenders mini­mi­sed.

Analy­sis: Risk of high value adjust­ment of the loans, total loss of equity. The Scan­di­na­vian owner lived in a non-EU coun­try. His owner company was a complex Swiss holding company with criti­cal econo­mic exis­tence.

Solu­tion: Inten­sive mode­ra­tion of nego­tia­ti­ons between the parties invol­ved, the hotel chains’ heads of deve­lop­ment in Germany and abroad, success­fully persua­ded former Management company B to enter into a Management contract directly with the owner and to agree on 20 years.

The owner had to expand its func­tion as a risk-free lessor to include the func­tion of the party directly invol­ved in the finan­cial risk as the hotel opera­tor. In this role, he took on the busi­ness risk of the hotel, but was able to mini­mise it to a large extent, since the Management func­tion was able to be handed over to inter­na­tio­nally renow­ned hotel chain B. The closure of the hotel was able to be preven­ted just a few hours before the dead­line of midnight on 31 Decem­ber, the opera­tio­nal trans­fer was success­ful.

In addi­tion, it was necessary that the capi­tal provi­ders assu­med a guaran­tee, in order to put the hotel opera­tor in a posi­tion to make the invest­ments that had been put off for several years. By reor­ga­ni­sing the rents and inte­rest char­ges in favour of the invest­ment, the threa­te­ned insol­vency was able to be avoided. This could only be achie­ved in the short time avail­able by making use of all time reser­ves. The project analy­sis, stee­ring and respon­si­bi­lity were taken on by our Senior Part­ner with expe­ri­ence in the hotel indus­try.



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