Pphe Hotel Regulatory News (PPH)

Regulatory News

Released: 4 August 2010

Park Plaza Hotels Limited (Park Plaza Hotels or the Company)

Acquisition of interests in the Park Plaza hotels in Leeds and Nottingham

Park Plaza Hotels, owner, operator and franchisor of hotels in Europe, the Middle East and Africa, has today announced that it has acquired, through its wholly-owned subsidiary, Euro Sea Hotels N.V. (Euro Sea), the entire issued share capitals of Hotel Leeds Holding B.V. (Leeds), Hotel Nottingham Holding B.V. (Nottingham) and Nottingham Park Plaza Hotel Operator Limited (NPPHOL) from Leno Hotel Holding B.V. (Leno), a wholly-owned member of the Red Sea group, for an aggregate cash consideration of £3.31 million.

The principal asset of Leeds is a 99-year lease of the Park Plaza Leeds hotel (which runs until 2099), in respect of which the current annual rent is £1.03 million (the Leeds Lease). The principal asset of Nottingham is a 99-year lease of the Park Plaza Nottingham hotel (which runs until 2099), in respect of which the current annual rent is £0.47 million (the Nottingham Lease). Both hotels are operated by Park Plaza Hotels Europe B.V. (PPHE) under a long-term operating agreement with NPPHOL, which carries on the business of the hotels. Immediately prior to the completion of the acquisition, Leno injected £3.31 million of additional capital into Nottingham, which will be used to pay outstanding management fees owed by NPPHOL to PPHE.

For the year ended 31 December 2009, the audited loss before tax of Leeds was £0.61 million, the audited loss before tax of Nottingham was £0.41 million and the audited loss before tax of NPPHOL was £1.39 million. The above figures are stated after deducting interest in respect of the Loans referred to below of £0.87 million for Leeds and £0.55 million for Nottingham and approximately £3.3 million in respect of management fees owed to PPHE.

The Company has also acquired Leno Investment Limited (Leno Investment), a wholly-owned subsidiary of Leno, for £1. Immediately prior to its acquisition by the Company, Leno Investment, (which was incorporated in February 2010) acquired certain loans owed by Leeds and Nottingham (the Loans) for an initial consideration of £5 million, which represents a substantial discount to the book value of the Loans. Of the initial consideration, £2 million was paid on completion of the acquisition of the Loans and the remaining £3 million has been deferred on a stepped interest bearing basis for up to 3 years. The balance of £3 million, repayment of which is guaranteed by the Company, will become repayable on the occurrence of certain events, including a disposition of either of the hotels or any dilution of the Company's interest in Leno Investment. In addition, if there is a sale or other disposal of either or both of the leasehold interests in the hotels at any time during the next 2 years for an aggregate consideration in excess of £25 million, Leno Investment will be required to pay further consideration to the original lender in an amount equal to 50 per cent. of the excess. The Company provided Leno Investment with the necessary funds to meet the initial payment for the Loans, which has become an inter-company debt following the acquisition of Leno Investment by the Company, and has agreed to finance the deferred consideration payable when it becomes due.

Apart from the Loans, the management fees owed by NPPHOL to PPHE and liabilities arising in the ordinary course of the hotels' businesses, none of Leeds, Nottingham or NPPHOL has any material liabilities. The only material assets of such companies are the leasehold interests in the Park Plaza Nottingham and the Park Plaza Leeds. Leno Investment's only assets are the Loans and its only liability is the loan provided by the Company to purchase the Loans.

Eli Papouchado, the Company's Chairman, and members of his family indirectly control (via certain members of the Red Sea group) Euro Plaza Holdings B.V., which owns approximately 45 per cent. of the Company. As such, the transaction is a related party transaction for the purpose of Rule 13 of the AIM Rules for Companies.

The Directors of Park Plaza Hotels (other than Eli Papouchado, who is interested in the transaction, and Boris Ivesha, who is treated as acting in concert with Euro Plaza Holdings B.V. for the purposes of the Takeover Code), having obtained valuation advice in relation to the leasehold interests in the hotels from Savills plc and consulted with Investec Investment Banking, a division of Investec Bank plc, the Company's nominated adviser, consider that the terms of the acquisitions of Leeds, Nottingham, NPPHOL and Leno are fair and reasonable insofar as the Company's shareholders are concerned.

The Company has today also announced that it has acquired the entire issued share capital of Waterford Investments Limited (Waterford) from Julian Donn for £1. Waterford's principal assets are:

(i) the freehold of the Park Plaza Leeds hotel (held through Waterford's wholly-owned subsidiary, Laguna Estates (Leeds) Limited (Laguna)). The hotel is let by Laguna to Leeds under the Leeds Lease;

(ii) a lease of the main site of the Park Plaza Nottingham hotel which runs until 2145 (held through Waterford's wholly-owned subsidiary, Katmandu Limited (Katmandu). The hotel is let by Katmandu to another of Waterford's wholly-owned subsidiaries, Sandbach Investments Limited (Sandbach), which in turn leases the premises to Nottingham under the Nottingham Lease; and

(iii) a lease of land for storage use adjoining the Nottingham Park Plaza hotel which runs until 2061 (held through Katmandu). The land is let by Katmandu to Nottingham.

Laguna has a term facility from The Royal Bank of Scotland plc, under which, following the repayment referred to below, approximately £13.72 million is currently outstanding. £12.6 million of the loan carries fixed interest until 2019 at 6.43 per cent. (plus mandatory costs) per annum and £2.3 million of the loan carries fixed interest until 2019 at 7.78 per cent. (plus mandatory costs) per annum. The loan is repayable in 2019. Immediately prior to completion of the acquisition of Waterford, the Company provided Laguna with the funds to enable it to reduce the amount outstanding under this loan by £1.25 million, which was a condition of the bank's consent to the change of control of Waterford.

Katmandu has a term facility from National Westminster Bank PLC, under which approximately £5.94 million is currently outstanding. The loan carries fixed interest until 2027 at 6.84 per cent. (plus mandatory costs) per annum and is repayable in 2027.

As part of the acquisition of Waterford, the Company's wholly-owned subsidiary, Park Plaza Hotels Europe Holdings B.V. (PPHEH), acquired from Martin Morris a deep discount bond issued by Laguna in 2008 for approximately £2.7 million and which has a current carrying value in Laguna's books of £3.14 million, for a cash consideration of £2.0 million.

As a result of the transactions completed today, the Park Plaza Leeds and the Park Plaza Nottingham hotels are now owned as well as operated by the Park Plaza Group, which will facilitate the planned refurbishment of the two hotels.

Boris Ivesha, Park Plaza Hotels' President & CEO commented: "We are very pleased to add these two landmark hotels to our portfolio of contemporary hotels in city centre locations and are excited about the long term prospects both hotels offer. Having operated both of these hotels since opening, we are very familiar with them and we will continue to build on their strengths. Renovation programmes for both hotels will be planned shortly."

www.parkplazahotels.net

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Notes to Editors

Park Plaza Hotels Limited is owner, operator and franchisor of hotels in Europe, the Middle East and Africa. The majority of the group's hotels operate under the Park Plaza Hotels & Resorts brand (part of Carlson Hotels Worldwide), over which the Group has exclusive rights in 56 countries in EMEA, or art'otel, a brand which the company fully owns. Park Plaza Hotels also manage the luxury all-suite Plaza on the River - Club and Residence, London.

Through it strategic partnership with Carlson, one of the world's largest travel and hospitality companies, Park Plaza Hotels has access to Carlson's powerful reservation and distribution system, airline partnerships with 20 airlines, loyalty programmes such as goldpointsplusSM for guests and Look To Book® for travel agents and cross-selling opportunities. 

There are currently over 35 hotels and aparthotels and nearly 7,000 rooms in the Group's portfolio. By the end of 2012, the Group's committed projects and territorial franchise agreements are expected to increase the number of rooms to over 13,000. Projects under development include Park Plaza Marrakech (2010), Park Plaza Nuremberg (2011), art'otel amsterdam (2011) and art'otel london hoxton (2013).

Park Plaza Hotels' shares are admitted for trading on London's AIM Stock Market.

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