IRISH HIGH net-worth individuals who invested £92 million in the Quinlan Private-led purchase of a portfolio of almost 50 Marriott hotels in the UK in 2007 have seen their investment wiped out, after a receiver was appointed to the portfolio of hotels.
Royal Bank of Scotland has appointed Ernst & Young as receiver to over 42 Marriott hotels in one of the largest ever corporate restructurings of the hotel sector. Quinlan Private, the private equity firm founded by Derek Quinlan, bought the portfolio of 47 hotels in 2007 for £1.1 billion in conjunction with a group of Israeli investors.
Quinlan Private is believed to have provided 46 per cent of the £200 million equity element of the deal, with RBS financing the bulk of the £900 million debt.
Up to 80 Irish investors invested in what was one of the most highly-leveraged deals of the time. Derek Quinlan and a handful of developers are understood to have contributed a larger proportion than the bulk of investors – at least €5 million each.
A number of well-known legal, accountancy and media professionals are believed to have invested in the deal which involved a minimum investment of around €250,000 according to informed sources. The appointment of a receiver comes after more than two years of negotiation between the owners and their lenders after loan covenants were breached.
Five of the hotels were re-branded and sold in 2007 to reduce the debt.
Irish investors were also tapped in a cash-call in 2009, though it is understood that this was ultimately returned to the investors when the restructuring plan was abandoned.
A debt-for-equity proposal was then pursued by the bank. Failure to reach agreement on the issue led to the appointment of a receiver. It is thought a hedge fund which owns a portion of the bank debt may have also triggered the appointment of the receiver.
In a statement yesterday, Avestus Capital, the company founded by Derek Quinlan’s former partners which took over the asset management business of Quinlan Private, said the decision to appoint a receiver was “unnecessary”.
“Despite the challenging economic environment, the 42 hotels in the Marriott portfolio have continued to profit and performed considerably ahead of competitors. Having appointed Rothschild as professional advisors, a business plan was produced which included proposals for further investment as part of a wider restructuring involving all stakeholders in the business.”
An Ernst & Young team will now take charge of the properties, which are owned by a holding company registered in the British Virgin Islands with a sale of the portfolio most likely. A spokeswoman for Marriott, which holds 30-year management agreements with the hotels dating from 2006, said the management of the hotels is “entirely unaffected by these actions as is any subsequent sale to a new ownership group”.
