London Savoy hotel risks loan breach if results don't improve
London's Savoy hotel is at risk of breaching the terms of its bank loans if trade does not improve, according to its owner.
Breezeroad Limited, the holding company for the Savoy Hotel Limited, made the statement in a report filed with Companies House earlier this week. In it the company said it had secured bank financing until 2018 and that projections indicated that it would continue to meet all its liabilities as they fall due, but only if performance improves.
"However the projections assume an improvement in trading and if this is not achieved then certain covenants in the bank loans may be breached, which could cause these loans to become repayable on demand. The risk represents a material uncertainty which could cast significant doubt as to the Group's ability to continue as a going concern," said Breezeroad in its directors' report.
The report went on to say that the directors didn't believe that such a covenant breach would have a "detrimental" impact on the ability of the Group to continue to operate.
Loans to the company are controlled by Saudi billionaire Prince Alwaleed Bin Talal and a unit of Lloyds Banking Group, with each owning half of the Savoy according to a statement in April when the hotel's debt was refinanced.
The hotel posted a net loss after tax of £53.5m for the year ended 31 December 2012, a 7.3% increase on 2011 (£49.6m), which was the hotel's first full year of trading after closing for a three-year renovation. Operating profit was £8.1m (2011: £6.5m).
Revenue per available room for the period was £314.38, up from £293.70 in 2011.
The Savoy, which employs 487 staff, had a wage bill of £13.4m for 2012, up 3.8% from £12.9m the previous year.
The hotel is operated by Fairmont Hotels and Resorts. During 2012, a management fee of £1.75m was paid to Fairmont, with further fees handed over for sales and marketing of £876,252 (2011: £846,769). IT fees were £146,042 (2011: £141,128) and the global reservations centre bill was £174,416 (2011: £136,756).
