Allied Irish Bank and Santander buy £70m slice of Savoy Hotel loan

Allied Irish Bank (AIB) and Santander have bought a £70m slice of Crédit Agricole and DekaBank’s £200m five-year senior loan which refinanced The Savoy Hotel, owned by Prince Alwaleed bin Talal of Saudi Arabia and Lloyds Banking Group, CoStar News has learned.

AIB big logoAIB’s unexpected participation in a new property deal is thought to reflect a modest appetite in exclusively hotel debt, particularly where the loan has a corporate debt-like structure.

Crédit Agricole and DekaBank received considerable interest from banks and insurance lenders for the syndication of the loan, but the syndication is understood to be capped at £70m, with DekaBank only modestly reducing its £100m as part of the sell-down.

The Savoy Hotel is owned by Breezeroad, a joint venture company in which Lloyds and Prince Alwaleed’s Kingdom Hotel Investments (KHI) each have a 50:50 joint stake.

KHI and Lloyds refinanced the complex legacy debt and equity back in April with a fresh £458m capital stack, secured by the 124-year old iconic London hotel.

The margin on Crédit Agricole and DekaBank’s senior loans is between 380 and 400 basis points over three-month LIBOR, according to a filing with Companies House.

In the wider restructuring, Lloyds effectively reduced its net investment in the Savoy Hotel.

Lloyds transferred its equity interest Breezeroad – previously held by the bank’s legacy HBOS non-core equity and mezzanine subsidiary, Uberior Ventures – to Prestonfield Investments, the bank’s new subsidiary which houses the equity and mezzanine investments for core clients.

Under the new capital structure, Lloyds’s Prestonfield has extended three new mortgage-secured mezzanine-like loans – at £60m, £50.5m and £32.5m, respectively.

Prestonfield’s £60m and £50.5m mezzanine loans are priced at 12% and 15%, respectively.

Prince Alwaleed’s KHI has similarly extended a £50.5m mezzanine-like loan, priced at 15%, along with a £32.5m equity tranche and two smaller facilities, at £16.75m and £15m, both priced at 7.75%.

All eight fresh facilities – which funded around mid-April – mature in March 2018.

KHI, is a subsidiary of Kingdom Holding Company (KHC), which Saudi billionaire Prince Alwaleed founded and chairs.

The Saudi billionaire bought the grade II-listed Savoy Hotel eight years ago for around £220m from a consortium of Irish investors, led by Derek Quinlain’s Quinlan Private.

A major refurbishment was then undertaken to renovate the Strand hotel, with the Savoy closing for almost three years from mid-2007 to 10 October 2010. The projected £100m refurbishment costs eventually ran to £230m – more than the figure which Prince Alwaleed bin Talal reportedly paid for the hotel itself.

About CoStar News

Finance Editor, CoStar News
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