Our client was in the process restructuring his hotel’s assets from a full service product, to short stay accommodation apartments, as our clients full service hotel concept with à la carte dining wasn’t sustainable due to the change in dining out preferences, which resulted in high costs and unpredictable trading, leading to a trading loss and inevitably a breach of debt service covenants.
The existing debt of £6,000,000 was disproportional to the trade and asset value and the change to short stay accommodations, although a viable proposition couldn’t service debt when stress tested and sensitised against the lenders criteria, which in-turn led to a default on debt service covenant. The reality of the situation was that the business could only service debt of £3,000,000 on a full repayment basis.
Debt restructuring solution
After working with a number of commercial valuers to ascertain distressed market values, we entered into negotiation with the lender and secured a debt write down of 50% amounting to £3,000,000 based on comparable market values. The debt write-down was initially refinanced by a specialist near prime lender which we then subsequently refinanced after 36 months to a term debt facility on standard commercial terms.
For more information on how we can help restructure your debt please get in touch