Cameron House owner does debt deal

ALTERNATIVE Hotel Group, owner of Cameron House on the shores of Loch Lomond, has agreed one of the largest debt-for-equity swaps in British corporate history with Lloyds Banking Group.

AHG, which owns the De Vere Hotels business, swapped about 650 million of its 1.7 billion debt pile in exchange for preference shares in a restructuring of a troubled loan which Lloyds inherited from HBOS.

The preference share swap is unusual in that it does not dilute the existing owners' shareholding. AHG's management team, led by chief executive Richard Balfour-Lynn, retains its existing 50 per cent equity stake in the business. As a result, AHG says it will save 60m a year in loan interest.

Balfour-Lynn said the deal was a "long-term restructuring rather than a short-term work out" and that the "attitude of the bank is positive".

"I believe this successful outcome reflects a recognition by our banking partners, not only of the quality of our businesses and the underlying assets, but also the quality and calibre of AHG's management team," he added.

Lloyds has begun to undertake some debt-for-equity swaps involving preference shares in its attempts to unravel the massive loans made by HBOS Corporate.

In December, it did a 30m swap with Inverness housebuilder Tulloch that did not dilute the management's 40 per cent share in the firm.

Bryan Johnston, director with asset manager Brewin Dolphin, said the prefs swap was a "neat solution to a problem" of too much debt but that it was "not a solution they (the bank] would come to with rabid enthusiasm".

He said preference stock typically ranks above equity shares in terms of payouts or sales but does not dilute the underlying equity.

The deal will be watched closely by HBOS Corporate-backed hotel groups in Scotland currently in talks with Lloyds to restructure debt. Macdonald Hotels and The Townhouse Company both expect to conclude discussions with Lloyds in the autumn.

It is understood AHG may also become a platform for consolidating other hotels businesses backed by Lloyds or other lenders.

Balfour-Lynn said lenders had "a lot of hotels under their control now that they need to work out over the next few years".

"They need people to operate those assets for them in some cases," he said.

AHG's banking facilities have been extended to December 2013, and the group said it was "well placed" to increase its market share of the hotel and conference market.

Following the agreement with Lloyds, AHG confirmed that restructuring specialist Andrew Coppel would be appointed as chairman. As chief executive of Queens Moat Houses, Coppel transformed the business, which had fallen into financial difficulties during the recession of the early 1990s.