International Hotel Investments to issue €55m secured bond as losses shrink

International Hotel Investments has announced the issue of a €55m secured bond after securing approval from the Malta Financial Services Authority. The bonds offer investors an interest rate of 4% and are redeemable in July 2026.

The new issue follows on from another set of 10 year bonds being released in 2015 worth €45m, with an interest rate of 5.75%.

This means that International Hotel Investments has total debt obligations worth €190m, the first €35m of which is maturing in July 2019.

Existing shareholders of the hotel group will be given preference to subscribe to the first €30m of the new bond issuance, with the remaining €25m open to the general public.

The bond is secured against the Corinthia Hotel Budapest, which reported a gross operating profit of €8.4m in 2015, up from €6.5m in the previous year and €5.6m in 2013. The same hotel reported earnings before interest, taxation, depreciation and amortisation (EBITDA) of €6.7m for 2015, which equates to a margin of 29%, up from 26% in the previous year.

Overall, the International Hotel Investments Group made a loss before tax of €349,000 in 2015, down from a €29.8m loss in 2014. This was largely driven by a €17.7m increase in revenue, climbing 15.2% to €134.1m for 2015.

Chairman Alfred Pisani said: “I am pleased to report that the IHI Group has enjoyed a good year, with practically all our hotels recording improved performance. Our Company achieved an EBITDA in 2015 of €44m, inclusive of our share in the Golden Sands Resort in Malta and the Corinthia Hotel in London.

“This is all the more satisfying given that conditions in Europe have been far from optimal and especially because we continue to be affected by circumstances beyond our control in two major cities: our hotels in St Petersburg and Tripoli.”

He continued: “Though our hotel in St Petersburg recorded better results last year thanks to the positive decision we took to focus on the domestic Russian market, revenues in euro from this property continue to be affected negatively by the devaluation of the Rouble – which has practically halved in value since 2014.

“As has been well documented, the situation in Tripoli has also presented us with major challenges. However, I am happy to report that after suffering a major setback in January of last year, our hotel in the Libyan capital is now better equipped with improved security features and upgraded facilities. We are proud to state that the hotel is looking as good as new and is ready to resume normal operations when the political situation permits.”

Despite the depreciating Rouble, the Corinthia Hotel St Petersburg reported a gross operating profit of €4.2m in 2015, up from €3.0m in 2014, while the Corinthia Hotel Tripoli reported a loss of €3.0m in 2015, higher than the €1.2m loss in 2014, and much worse than the €6.6m gross operating profit reported in 2013.

Last year also saw International Hotel Investments complete the acquisition of Island Hotels Group in Malta, which included adjoining hotels in St George’s Bay in Malta; a development plot in the north of the country; and a 50% stake in Golden Sands Resort, a Maltese timeshare operation.

Pisani said of the St George’s Bay redevelopment: “We now have a golden opportunity to elevate the level of the St George’s Bay area and harness the ever-increasing demand for accommodation and residential units on the island. We will therefore be embarking on an ambitious mixed-use project, which comprises two hotels and a high-end residential and commercial element.

“We intend to achieve this by raising the standard of the St George’s Bay hotel to the highest possible level – through a comprehensive redesign and upgrading of the interiors – and the construction of another hotel together with luxury apartments. Plans are already at an advanced stage and, subject to obtaining the necessary clearances, we intend to start work on site next year.”

The acquisition of Island Hotels Group also included the Maltese and Southern Spain franchises for Costa Coffee, and since the completion of the deal a further 10 stores in Malta have opened up to the end of the first quarter of 2015, and a further 15 stores in Spain.

International Hotel Investments wholly owns a total of nine hotels, and has a 50% stake in a further two, one of which is currently under construction.

The group also manages a further five hotels for third parties, as well as a further three that are also under construction.