AccorInvest agrees €500m state loan

AccorInvest has agreed a state guaranteed loan of €500m, France’s finance minister Bruno Le Maire announced.

The move was expected to stabilise the company after months of negotiations between banks and shareholders.

In addition to the state loan, Accor (which has a 30% stake), Colony Capital and the sovereign funds of Saudi Arabia and Singapore will inject cash. Sébastien Bazin, Accor chairman & CEO, told Le Monde: “We have to move relatively quickly. The good news is that AccorInvest has €4.5bn in debt, but far more assets than debts, about €7bn. It is therefore not a problem of solvency, but of liquidity.”

The group is also expected to extend the maturity of its debt.

Earlier this month reports suggested that AccorInvest was planning to cut around 9% of its workforce, or around 1,900 jobs. Last year saw hotel occupancy at the group fall from 74% to 22%, with the company not expecting a return to pre-Covid performance until 2024.

In 2018, out of 891 hotels, 324 were owned and 567 operated under fixed or variable-rent leases. In 2017, with 775 hotels under operating leases, the rental expense was €615m. HotelInvest as was had 58% owned at 2016, with, according to the 2017 annual report, a target of 77% owned by 2021.

In May 2018 Accor sold 57.5% of the company to several sovereign funds (Public Investment Fund and GIC), institutional investors (Colony NorthStar, Crédit Agricole Assurances and Amundi), and multiple private investors. Colonys current position sees it hold a $54.9m stake, equating to 4% of Colonys totally equity and 1% of AccorInvest, according to Colonys most-recent filing. Colonys position sits alongside €770m of third-party capital managed by the company, which combine to own approximately 22% of AccorInvest.

Speaking to analysts in August last year, Accor deputy CEO & CFO Jean-Jacques Morin, said: Like everybody in this industry, [AccorInvest] are suffering from the Covid situation. They were able to renegotiate just like a lot of us have done with the banks and extension or holiday of their covenants. And today, they don't have a liquidity issue.

AccorInvest has significant portfolios outside Europe, namely in Latin America, in Africa and also in Australia that they may want to monetise if they were really in dire straits, so there are some levers. I'm not saying that this is what's going to happen, but they are not in a situation which is critical.”

Since that call, the company went on to sell two portfolios of assets, beginning in November with the sale to Iris Capital of a 17-hotel AUD$180m Ibis portfolio, including Ibis hotels in city and airport locations including Sydney, Melbourne, Brisbane and Canberra.

Iris Capital CEO, Sam Arnaout, said: This purchase fits in well with our current hospitality pub portfolio [and] takes our count to 45 hotels and delivers on the groups strategy for diversification.

The AccorInvest portfolio is well placed for repositioning and gives Iris immediate scale in an extremely tightly held hotel market.”

Earlier this month, Kasada Capital Management, the investment platform backed by the Qatar Investment Authority and Accor, acquired a portfolio of eight hotel properties from AccorInvest. The deal, which had been in the making before the pandemic, was part of efforts to refocus AccorInvest towards Europe.

AccorInvest has seen recent executive changes, with Gilles Clavie taking over from John Ozinga as CEO. Clavie was president & CEO Orbis since 2014, where Accor completed the sale of an 85.8% stake to AccorInvest for €1.06bn.

The deal left Accor with a stake of 30%. Last year saw Bazin speculate on whether the group would sell its remaining holding in AccorInvest, commenting: We have a five-year lock up to 2023. Its going to be a matter of two things: do we get the green light from the other partners to relieve us from the three years of lock up - we havent asked them. We need to have an idea of what to do with the proceeds. The last thing we need is more cash on the balance sheet.”

Insight: So well now that’s done and phew all around for AccorInvest and those who would invest in it. The first part of the pandemic saw an initial foray into state-backed loans, but it is thought that it foundered on too much asked - and too much commitment wanted by the shareholders. Even now, the complexity of the deal has meant that it has taken longer than expected, with one observer having planned a festive celebration of a job well done. Handily, here in timeless pandemic land, time is no hindrance to celebrating.

Now that Accor knows the level of its commitment, this will give Bazin a chance to think about what moves the company will make to take advantage of, well, the weakness of others. The group is in a strong cash position and can flex accordingly.

And make a move it must. France has been watching the potential takeover of Carrefour by a Canadian group this month, a move blocked by Le Maire because of the company’s position as part of a protected industry. There is no such protection for Accor (which might have been angling for some through its aborted move on Air France). So, if, say, the Chinese come knocking, they must be repelled with cunning alone.