Dalata, the hotel group controlled by the former Jurys chief executive Pat McCann, has bought an €11.5 million loan attached to one of its Limerick hotels at a huge discount from Bank of Scotland (Ireland).
The group will pay BoSI just €2.5 million for the loan, a discount of 78 per cent. The bank’s willingness to take such a large hit illustrates its determination to disentangle itself from the Irish market.
A group of tax investors originally borrowed the cash on a non-recourse basis from BoSI in 2006 to fund the development of a Quality hotel in Limerick, which was operated by Frankie Whelehan’s Choice hotel group.
The well-known financier Kevin Warren appears to have been involved in helping assemble the consortium. Warren is listed as a director of the entities that took out the loan, alongside Stefan Foster, the property director of Warren Private.
The hotel was taken over by Dalata, the largest hotel group in the State, which leases it from the investors. It now operates the 143-bedroomed hotel under its Maldron banner.
Documents filed this week by Dalata in the Companies Registration Office (CRO) state it has agreed a deal with BoSI to buy the loans for €2.5 million. This includes a cash payment of €1.5 million, and €1 million of debt provided by Ulster Bank.
By buying the loans, Dalata will effectively gain control of the asset at the end of the year when the tax investors’ seven-year scheme unwinds.
The hotel group will technically still be owed €11.5 million by the investors. But as there is no recourse to the investors’ assets and the loan is secured solely on the hotel, it is envisaged that Dalata will take control of the hotel instead.
In effect, Dalata will have bought the building for €2.5 million, while the bank benefits by avoiding the costs of potentially having to appoint a receiver to sell it when the tax deal expires.
Dalata said the hotel will continue to operate as normal: “It is business as usual. We are delighted with the deal, and the hotel is continuing to trade well.” Source: The Irish Times