London Savoy Hotel Sees Risk of Loan Violations

The Savoy, the five-star London hotel once frequented by Winston Churchill, Marilyn Monroe and Claude Monet, would be at risk of breaching terms of bank loans if operating results don’t improve, according to the company.

“This risk represents a material uncertainty which could cast significant doubt as to the group’s ability to continue as a going concern,” according to an Oct. 7 filing to Companies House by Breezeroad Ltd., the hotel’s owner.

Breezeroad’s directors prepared projections that assume an improvement in business and indicate the Savoy will continue to meet its debts, according to the filing. If the financial projections aren’t met, loans to the company, controlled by Saudi billionaire Prince Alwaleed Bin Talal and a Lloyds Banking Group Plc unit, could become repayable on demand.

The Breezeroad directors said they don’t think a covenant breach would have a “detrimental impact” on the group’s ability to operate, according to the filing. Costs could be cut to avoid breaching loan terms or talks with lenders and shareholders could be held to resolve any loan violations, the directors said.

The hotel had a pretax loss of 53.5 million pounds ($85 million) in 2012, an 8 percent increase from a year earlier, according to the filing to Companies House describing last year’s results. Revenue rose about 3.5 percent to 58.5 million pounds last year.

Prince Alwaleed

Kingdom Holding, an investment company Alwaleed controls, and the Lloyds unit, each own half of the Savoy, according to a statement in April, when the hotel’s debt was refinanced. At that time, the London hotel was valued at more than 600 million pounds.

“Kingdom is supporting this asset and has a plan with Lloyds” for the hotel, Charles Henry, a spokesman for the Riyadh-based company, said by telephone.

Lloyds spokesman Emile Abu-Shakra said the bank remains “fully supportive of the management and this iconic hotel. “We are confident that the business will continue to trade profitably and that it will be able to meet all creditor payments as they fall due,” he said by e-mail.

Credit Agricole SA and DekaBank Deutsche Girozentrale have loaned 200 million pounds to a Breezeroad affiliate at a rate of 380 basis points, or 3.8 percent, to 400 basis points more than the London interbank offered rate, according to the filing.

Kingdom Loans

Lloyds and Kingdom Holding each loaned the group 50.5 million pounds at a 15 percent internal rate of return as part of the refinancing, the filing said. The co-owners also provided loans at a lower rate.

Representatives of the Savoy declined to comment.

The Savoy, located steps away from the north bank of the River Thames on The Strand, first opened in 1889. It reopened in October 2010 after a 230 million-pound renovation that took about 30 months. The hotel typically charges at least 330 pounds a night for a basic room, according to its website.