The Royal Bank of Scotland (RBS) is preparing to push Jarvis Hotels through a pre-pack administration that would allow it to acquire 20 hotels, according to a report in The Financial Times. Jarvis Hotels defaulted on £130 million (US$204 million) in loans 18 months ago with RBS as the lead bank of the lenders. This would transfer the ownership of the 4-star hotels operating under the Ramada franchise in the U.K. It’s unclear how quickly the bank can sell the properties.
Financial Times reported that a person familiar with the case said the bank had looked at every option to restructure the business and that taking over the hotels was the only way forward. The source added that the bank expects to use its West Register vehicle.
“West Register is the holding vehicle RBS used in the 1990s and a similar process to back then is likely, in that they will trade until the market recovers enough to make a sale at a price which recovers the debt, or RBS is robust enough to take the write-down. Given the current economic outlook neither scenario looks likely soon,” Andrew Sangster of the Hotel Analyst newsletter told HOTELS. “The hotels are under invested mid-market assets being squeezed by economy hotels such as Premier Inn.”
Jarvis Hotels is hardly the first U.K. hotel chain to go into administration following the economic downturn in 2008 — others include the von Essen Group and Menzies Hotels.
“Deal flow has clearly started after a prolonged period of ‘pretend and extend’ that followed the collapse of Lehman Brothers in late 2008,” Sangster said. “Personally I’m not convinced that this is likely to turn into a flood despite the huge volume of distressed loans in the hotel sector.”