US fund Canyon Capital buys out Ulster Bank’s debt in Moran Hotels

Los Angeles-based investment fund Canyon Capital Advisors has agreed a deal to acquire Ulster Bank's loans in Moran Hotels, the chain run by Limerick businessman Tom Moran and his family.

Moran Hotels is believed to have owed Ulster Bank about €120 million. While it's not clear what Canyon is paying for the debt, a significant discount is likely to have applied given the current weakness of the Irish economy and the collapse in property values here.

It is understood that a deal was reached late last week and will result in Canyon controlling a 35 per cent stake in the hotel business, which will increase its influence over the group.

In January of this year, Canyon purchased the near €150 million in loans held by Lloyds Banking Group, which were a legacy from when its Bank of Scotland (Ireland) subsidiary operated in this market.

Discount
It was reported at the time that Canyon paid just €42 million to buy the Lloyds' loans. This represented a discount of around 72 per cent on the face value of the debt.

This latest move by Canyon is likely to have surprised Moran’s other lenders, AIB and Bank of Ireland. The company is currently seeking to refinance this debt. According to its website, Canyon manages investment funds and separate accounts amounting to about $23 billion in assets. Founded in 1990, it employs more than 200 staff at its offices in LA, New York and London.

Moran Hotels owns 10 properties in Dublin, Cork, London, Manchester and Leeds. This includes the well-known Red Cow complex in southwest Dublin and the Bewleys hotel in Ballsbridge.

Debts
While highly successful at an operational level, the company has been hamstrung in recent years by debts associated with its €580 million acquisition of Bewleys Hotels in 2008.

Latest accounts for T&S Taverns Ltd, which operates Moran Hotels, shows that it made a loss of €41.8 million on revenues of €80.5 million in the year to the end of January 2011. Its earnings before interest, tax and amortisation totalled €24.3 million.

Its losses were due to various impairment charges relating to its properties and to a €37.5 million interest bill on its loans. The company’s net debt stood at €687 million at the end of January 2011.

No comment was available from Moran Hotels or Ulster Bank yesterday.