AccorInvest is reported to be looking to its banks and possibly shareholders for a refinancing by the end of the year, with a €450m state-backed loan also under consideration.
The group is thought to have asked Rothschild & Co to lead the discussions.
AccorInvest is thought to have around €2.9bn of bank debt, with €931m coming due next year.
Speaking to analysts in August, Accor deputy CEO & CFO Jean-Jacques Morin, said: “Like everybody in this industry, [AccorInvest] are suffering from the Covid situation.
“They were able to renegotiate just like a lot of us have done with the banks and extension or holiday of their covenants. And today, they don't have a liquidity issue.
“AccorInvest has significant portfolios outside Europe, namely in Latin America, in Africa and also in Australia that they may want to monetise if they were really in dire straits, so there are some levers. I'm not saying that this is what's going to happen, but they are not in a situation which is critical.”
AccorInvest, which has 904 hotels, reported a total revenue of around €4bn for last year. The hotels are both owned at operated under fixed or variable-rent leases. At the time of writing, this publication was seeking clarity on the split. In 2018, out of 891 hotels, 324 were owned and 567 operated under fixed or variable-rent leases. In 2017, with 775 hotels under operating leases, the rental expense was €615m. HotelInvest as was had 58% owned at 2016, with, according to the 2017 annual report, a target of 77% owned by 2021.
In May AccorInvest said that it was not planning to seek support through the French government’s state-guaranteed loan programme, after reports that it was in talks to raise up to €500m. Prior to the denial, rumour had suggested that, in return for the loan, banks would ask the group to commit to rebalancing its accounts by the end of the year via a capital increase to be subscribed notably by Accor and Colony.
AccorInvest has seen recent executive changes, with Gilles Clavie taking over from John Ozinga as CEO. Clavie was president & CEO Orbis since 2014, where earlier this year Accor completed the sale of an 85.8% stake to AccorInvest for €1.06bn. Ozinga had planned to make his exit in Spring next year.
In May 2018 Accor sold 57.5% of the company to several sovereign funds (Public Investment Fund and GIC), institutional investors (Colony NorthStar, Crédit Agricole Assurances and Amundi), and multiple private investors. Colony’s current position sees it hold a $54.9m stake, equating to 4% of Colony’s totally equity and 1% of AccorInvest, according to Colony’s most-recent filing. Colony’s position sits alongside €770m of third-party capital managed by the company, which combine to own approximately 22% of AccorInvest.
Accor then sold 5.2% of AccorInvest's share capital to several shareholders of the company (including Colony Capital), for €204m, valuing the real estate investment vehicle at €3.9bn.
The deal left Accor with a stake of 30%. Earlier this year saw chairman & CEO Sébastien Bazin speculate on whether the group would sell its remaining holding in AccorInvest, commenting: “We have a five-year lock up to 2023. It’s going to be a matter of two things: do we get the green light from the other partners to relieve us from the three years of lock up - we haven’t asked them. We need to have an idea of what to do with the proceeds. The last thing we need is more cash on the balance sheet.”
Insight: Gosh no, no-one wants more cash on the balance sheet.
AccorInvest is both owner and, with leases, liable for rent, of which no-one knows the payment situation. The question now is whether its existing shareholders will be happy to keep the faith or will, as Secure Income Reit has done with its Travelodge portfolio, pat hotels on the head and seek to tell them goodbye.
Given that Accor is one of those shareholders, this is unlikely, although it is equally unlikely that Accor will be making a faster exit from AccorInvest and will now remain committed until 2023. Its position in the negotiations will be key not only as a 30% shareholder, but as the operator of the assets - it must sell hotels as an investment all over again. Potential investors will be privileged to hear Accor’s plans to bounce back, which over the summer at least involved InterContinental Hotels Group. Oh to be a fly on the wall.