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Billionaire Livingstones In Talks With Lenders After £350M Hotel Loan Breaches Covenant

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London & Regional, the investment company of the billionaire Livingstone brothers, is in talks to amend the terms of a £350M loan secured against a portfolio of UK hotels after a covenant was breached. 

The servicer to the £350M securitised facility revealed last week that talks had been ongoing with London & Regional about amending loan terms after the debt yield covenant was breached. This covenant means the amount of income generated by a portfolio must remain above a certain level compared to the total outstanding debt. 

The loan is secured against 49 UK limited-service hotels totalling 5,972 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.

In an announcement last week to bondholders that bought the debt secured against the portfolio, the servicer acknowledged a sticking point in the negotiations. It said it had been in talks with London & Regional about amending the loan terms or waiving the breach, but it was not allowed to do so without the consent of bondholders. But that consent would not be received before a 14-day period to cure the breach expired. 

So as it stands, London & Regional has until 20 November to repay the loan or deposit the sum needed to cure the breach, which the servicer said in this case is £118M.

London & Regional did not respond to a request for comment. 

Ratings agency DBRS last week downgraded the debt secured against the portfolio. In its report on the debt it said that most of the hotels had been closed from March to June, severely affecting income. It said it expects income to be affected until potentially 2022, and so estimated the portfolio to be worth £367M, compared to £546M when the original loan was provided in December 2019.