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Billionaire Brothers Put Up £43.5M To Waive Loan Default


Property company London & Regional has agreed to pay £43.5M so that potential loan defaults on a £350M hotel loan hit by the coronavirus pandemic are waived. 

A notice to bondholders that own the loan said that the company run by billionaire brothers Ian and Richard Livingstone had agreed to repay £30M of the loan and put £13.5M into an account to be used for future interest payments. 

In return, the bondholders agreed to waive a loan-to-value covenant default that happened in February this year and a debt-yield covenant default that first occurred in October last year. 

The loan is secured against 49 UK limited-service hotels totalling 6,129 rooms managed by Atlas, the hotel company London & Regional bought from Lone Star for £550M in 2016. The majority are operated under franchise agreements with IHG and Hilton under brands like Holiday Inn Express and Hampton by Hilton.

An update to bondholders in July said that the value of the portfolio had dropped to £472M, putting the LTV for the portfolio at 74%, higher than the 72% covenant. 

Hotels have been one of the sectors hardest hit by the pandemic, with locations across the UK forced to close several times in the past 18 months due to lockdown regulations. This has had a knock-on effect for property investors that used debt to buy portfolios. 

In June 2020, Thai investor DTGO made a £17.5M payment to avoid breaching loan covenants on a £271M loan used to fund the £465M purchase of a portfolio of 17 hotels across the UK from hedge fund Marathon Asset Management. The deal was only completed in December, and Goldman Sachs provided and securitised the senior loan in late February. There is also £65M of mezzanine debt secured against the portfolio.

A second hotel CMBS transaction arranged by Goldman has also seen the borrower make a top-up payment. In 2018, a company of Israel’s Dayan family paid Apollo £742M for a portfolio of 20 UK hotels operated under the Holiday Inn brand. The transaction was funded by a £450M senior loan provided by Goldman and then securitised, and a £70M mezzanine loan.

In July 2020 the Dayan-backed company made a £28M payment in exchange for a series of loan covenant waivers, according to CBRE, which is also the servicer to that loan.