Citigroup to syndicate Starwood’s £200m Principal Hayley senior loan

Starwood Capital Group has acquired Principal Hayley’s 23-strong UK and European hotel chain for £360m, financed with a three-year £200m Citigroup senior loan.

Screen shot 2013-02-28 at 15.45.21Morgan Stanley Real Estate Funds was the underbidder to Starwood on the hotel transaction.

Lloyds Banking Group received the majority of the sale proceeds, with a minority going to the former senior management team, including Principal Hayley’s chairman, Roger Devlin, and chief executive, Tony Troy.

Lloyds, which through Bank of Scotland originally held a 30% equity stake and was Principal Hayley’s main bank lender, took over the hotel company from UK private equity firm Permira in 2010 after it struggled with debt repayments.

Since which time, Lloyds has written-off a considerable amount of its original debt and equity.

Citigroup is expected to start the syndication of the £200m three-year senior loan.

Goldman Sachs, which acted as financial adviser to Principal Hayley Group and Lloyds Banking Group, is also thought to have been the underbidder on the Starwood financing mandate, CoStar News understands.

Principal Hayley hotel portfolio comprises 23 city centre hotels throughout the UK and Europe, including Edinburgh’s iconic The George, Glasgow’s Grand Central Hotel, London’s Hotel Russell and the St David’s Hotel in Cardiff.

The hotel portfolio comprises 4,000 bedrooms, over 500 meeting rooms and ability to host over 26,000 delegates per day in key locations.

Starwood Capital owns more than 1,100 hotels located in 39 countries, including the Etoile in Paris and the Eden in Rome, as well as the Baccarat Hotel & Resorts brand and the Louvre Hotel Group.

Barry Sternlicht, chairman and CEO of Starwood Capital, said: “This transaction marks an exciting investment in the European hotels and conferences sector and provides a great management platform for us to expand further in Europe. Principal Hayley’s assets include historic and iconic properties strategically located in many key city centre locations.”

“We intend to use our capital and branding expertise to maximize the value of each property in the portfolio,” said Jeff Dishner, senior managing director of Starwood Capital. “We look forward to working with the Principal Hayley management team to grow the enterprise.”

Roger Devlin, chairman of Principal Hayley, said: “I believe it is a significant achievement in challenging market conditions to have delivered a fair exit multiple for stakeholders within a disciplined timeframe. This is the right deal for customers and employees alike.”

Tony Troy, CEO of Principal Hayley, said: “We are pleased with the opportunity to work with Starwood Capital, which has extensive experience in the hospitality sector and a very strong track record. We look forward to the future development of the Group as a platform for growth.”

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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