Minor and NH reposition

Thai group Minor International is preparing to take its Spanish brands from subsidiary NH global, as it looks to recover from the pandemic.  

And the group has taken several steps to stabilise its finances, as it readies for a return to growth and stronger revenue flows. In Thailand, Minor has launched a debenture issue, while in Spain a rights issue and asset disposals are under way, to reduce debts.  

Minor has been hard hit across its portfolio of hotels and other hospitality businesses. First quarter revenues were down 44% year on year, as other parts of the business failed to offset substantial reductions in hotel business activity. Monthly cash burn was THB1.1bn, with hotels in Asia Pacific hit equally hard as those in the European NH business.   

At the beginning of July, Minor launched the latest of several rounds of fundraising, drawing in THB10bn via the issue of three tranches of debenture. The two, three and four year paper saw strong demand from institutional and retail investor offerings, and will pay 3%, 3.4% and 3.6% annual interest, respectively. With the hope of a strong recovery, Minor has issued the debt with an early redemption option. 

In China, Minor has signed a joint venture with local partner Funyard Hotels & Resorts, designed to spread its presence in the Chinese market. The pair, who signed a memorandum of understanding in January 2021, will put the existing seven Minor properties in China into a JV vehicle, with Funyard leading on management and distribution.  

Growth will focus on launching further properties under the Avani, NH Collection and Oaks brands. Oaks is currently an Australian and New Zealand brand, covering serviced apartments and resorts, and the pair have already identified the first Chinese site for Oaks, in Hangzhou. Currently, Minor has Anantara properties open in Xishuangbanna, Yunnan and Guiyang, 

Guizhou and is about to launch a Tivoli branded hotel in Chengdu.  

Ji Hongjun, President of Funyard commented: “To successfully meet the demands of China’s modern-day traveller, the hotel sector must diversify its market segmentation by offering a wider choice of brands. As Minor’s brands originate in parts of the world as diverse as Asia, Europe and Australia, they each offer unique positioning, brand concept and core values, which makes the group the perfect partner to deliver on our joint vision.” Funyard currently manages more than 200 hotels in China, and alongside its home grown brands looks after properties for Hilton’s Home2Suites brand and operates a number of joint venture extended stay properties with Oakwood.  

In Spain, NH has kicked off a new round of asset disposals to reduce property liabilities. After a competitive bidding round, LaSalle Investment Management has paid EUR125.5m for the NH Collection Barcelona Gran Hotel Calderón. The deal has enabled NH to effectively write its own lease, which starts with a post-pandemic ramp-up over two years, after which the rent is a percentage of revenues, subject to an initial floor of 4.14%.  

The sale gives NH a net EUR113m towards its planned EUR200m target of disposals to draw in liquidity; as well as a net capital gain of EUR46.7m. 

The last few weeks also saw NH tidying up its debts. In May, lenders agreed to extend a EUR250m loan and EUR242m revolving credit facility to 2026, as well as waiving compliance with financial covenants for a further year. A further EUR100m loan provided by Minor would be converted into equity via a rights issue, the board decided. And EUR400m of senior secured notes were issued, dated 2026, to refinance notes maturing in 2023. The paper, with a 4% coupon, was oversubscribed.  

In a statement, the company said: “the battery of refinancing, capital increase, and asset rotation measures proactively implemented in recent months, and specifically the extension of all major debt maturities for five years, provides a solid foundation for facing the imminent sector recovery.” 

The company is convinced its plans will build back better, with non-executive chairman Alfredo Fernandez Agras telling shareholders: “We have laid the foundations not only for getting back to where we were, but for becoming an international benchmark for the post-pandemic hotel experience.” 

While well placed to benefit from the upsurge in European leisure business through the summer, NH is also laying out its stall for returning business guests. It is rolling out Smart Spaces for work in its hotels, has a hybrid meetings offering, and launched its NH+ business programme, a four tier membership channel for companies that delivers volume discounts, premium connectivity and flexible arrival and departure. 

Further organisational efficiencies and digitisation of the business are expected to strip EUR34m a year out of running costs.  

Debt rating agency Fitch put a B+ score on NH’s EUR400m paper, and has reaffirmed a BBB rating on Minor’s securities. Fitch noted: “We do not currently envisage resumption of business travel until the pandemic is contained, so our occupancy forecast for 2021 remains conservatively almost halved relative to 2019.”  

The lender also declared itself comfortable with the relationship between the two businesses where, despite Minor holding 94% of NH shares, the business has remained listed on the Spanish market: “Our assessment of ties between NHH and Minor remains ‘Moderate’ due to independent liquidity and treasury management demonstrated by the subsidiary, as well as dividend restrictions that remain in place for a material part of its external financing, including for the new notes. Our assessment is also supported by Minor’s support through its recent cash injection that underlines NHH’s strategic importance for Minor.” 

HA Perspective [by Chris Bown]: There must have been plenty of discussions at Minor about whether to retain NH as a Spanish listed company. With 94% of the shares in its hands, why not simply absorb the subsidiary?  

Thankfully, during the pandemic, that decision to retain the visibility of a separate listing has probably helped both parties, enabling NH to honestly report how its business has been suffering, to draw on official business support, and go to the market transparently when renegotiating waivers.  

We’ve been writing about NH’s financial restructurings for a decade, during much of which it waded through debt. Prior to the pandemic, and with the gentle support of Minor, NH looked to have things under control and the numbers were steadily dropping. Covid-19 has put that progress back some time, but it is clear that, this time around, NH is being encouraged to take a tougher look at its business, and at moving to a more flexible, asset lighter model for the future.  

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