How is a syndicated loan structured

Solid foundation for dynamic growth

Case study syndicated loan

The German hotel operator Hospitality Alliance has been on a solid growth path for years. A syndicated loan led by Postbank ensures stability in its financing.

Exactly 50 years ago, Helmut Fitz laid the foundation for today's H-Hotels Group with the establishment of the first Treff holiday parks and hotels. Since then, the family-run company has grown steadily. With more than 60 hotels and around 17,500 beds in Germany, Austria and Switzerland, the group is one of the largest hotel companies in Germany today. In 2019 alone, five new H-Hotels of various categories and a complex with serviced apartments were opened in Germany. There are already further expansion plans for the new decade: "Depending on the market situation, we will open further properties in the next few years, especially at locations where we are already represented with one of our brands," says Thomas Querl, Chief Financial Officer of Hospitality Alliance GmbH. which acts as a holding company for the H-Hotels Group. But new locations are also to be opened up: Among other things, the first H-Hotel outside of the German-speaking area will open in Budapest at the end of 2020.

 

New milestones, new financing
A milestone on the way to new growth at the Hospitality Alliance was the development of six own accommodation brands and concepts from 2010 (see picture slider). Another is the development from a hotel owner to a pure hotel operator. “It was this transformation of our business model in particular that prompted us to also put our financing structure to the test,” says Thomas Querl. Background: In the course of its corporate history, the Hospitality Alliance had built up a heterogeneous financing structure with a large number of bank connections and financing with regional financing partners. "In the meantime, this structure had not only become comparatively non-transparent, it was also associated with considerable administrative effort," explains Michael Schmitt, Head of Finance at Hospitality Alliance GmbH. In addition, with the transformation from the hotel buyer to the tenant or leaseholder, the financing requirements have also changed: "Previously, in addition to investments in the equipment of new hotels and existing properties, the focus was primarily on real estate financing, now it is the rent required for the long-term rental of the buildings. or Lease Avale ”, explains Thomas Querl. "Our goal was to securely finance the group here for the next few years."

The brands of the H-Hotels Group

Syndicated loans - transparent and flexible
Uwe Finke had a suitable solution ready for the new financing requirements of the Hospitality Alliance: The head of customer service for business and corporate customers at Postbank in Hanover recommended that the financing be concentrated on a few bank partners and bundled in a syndicated loan, also known as a club deal . A bank takes on the leading role as a so-called lead arranger and puts together a bank consortium on behalf of the company, which acts as a lender.

This is how the syndicated loan works

More and more entrepreneurs are benefiting from the advantages of syndicated financing.

 

Experienced Postbank experts take on the role of lead arranger and put together the consortium according to the company's specifications.

 

The company benefits from significantly reduced complexity.

 

Communication with all banks now only runs through a single administrative point.

This solution has many advantages over the previous financing mix:

 

  • More transparency: important interest-bearing financing sources are bundled and the financing structure is simplified.
  • More planning security: With terms of three or more years, the borrower receives medium to long-term secured financing.
  • More stability: none of the banks in the consortium can pull out of the deal prematurely.
  • More efficiency: The company has a central point of contact for all financing questions in the form of the lead arranger.
  • More flexibility: Syndicated loans usually consist of a working capital limit (current account) and a base amount that can be called up successively. This ensures flexibility that a borrower's note loan, for example, cannot offer.

 

Uwe Finke has been advising Hospitality Alliance GmbH intensively on questions of payment transactions and financing since 2015. To structure the syndicated loan, he brought in his colleague Sven Loock, a specialist in structured and syndicated finance at Postbank in Bonn. He negotiated the details of the club deal with three other banks, including two existing financing partners of the H-Hotels Group. "It usually takes up to six months from mandating to signing the contract," explains Sven Loock. In the case of Hospitality Alliance, however, the process took longer. One reason for this was the high number of more than 60 guarantors, for each of which a number of payment requirements had to be checked. In addition, at the time the contract was drafted, Hospitality Alliance was still dealing with the sale and rent back of some hotels. “For the acquisition of the financing partner for a syndicated loan, you actually need a fixed valuation basis. Hospitality Alliance, however, continued to develop at a rapid pace. That made the negotiations challenging, ”recalls Sven Loock.

Partnership at eye level

After seven months, tailor-made financing was in the high double-digit million range; on the one hand as an investment loan for refurbishment and renovation measures in the existing houses and for the initial furnishing of new properties, on the other hand as classic liquidity for working capital and as security for rent and lease guarantees. The loan with a term of five years is provided by four core banks and managed centrally by Postbank as lead arranger.

 

“We are very satisfied with the current financing solution. The Postbankers proved to be partners on an equal footing in all challenges, providing us with optimal support at all times and still doing that today, ”says Thomas Querl. This applies to questions of financing as well as to payment transactions; here the cooperation has just been expanded again. In terms of growth, there is still no end in sight at Hospitality Alliance.

H-Hotels on a growth path

With the establishment of the first Treff Hotels and Holiday Parks in 1969, Helmut Fitz gave the go-ahead for the development of today's H-Hotels Group. In 2000, Alexander Fitz took over management of the company from his father. In 2010 the group began developing its own hotel brands, and in 2014 it was renamed H-Hotels AG. The new umbrella brand H-Hotels.com also became the name for the hotel group's travel portal. Since 2017, all hotels have been under the umbrella of their own brands. The H-Hotels Group is one of the largest German hotel groups today.

 

Number of hotels: 63

Locations: 50 (D, A, CH)

Employees: approx. 3,000
Turnover: 436 million euros (2018)
www.h-hotels.com