Indemnity Announcement
22 March 2011
Park Plaza Hotels Limited
("Park Plaza" or the "Company")
Indemnity to Southern Hotels Holding Investment Israel B.V ("Southern")
Park Plaza has today entered into a deed of indemnity in favour of Southern (which is part of the Red Sea group of companies, in which Mr. Eli Papouchado, the Chairman of Park Plaza, and members of his family are interested) in connection with the lease of the Park Plaza Sherlock Holmes, Baker Street, London W1 (the "Lease").
The Lease is held by Grandis Netherlands Holding B.V. ("Grandis"), a wholly-owned subsidiary of Park Plaza. The Lease is for 99 years from 29 September 1996, with upwards only rent reviews every 5 years. The rent currently being paid by Grandis is £650,000 per year, but the rent review for the period from September 2006 has not yet been agreed and is the subject of arbitration proceedings. It is expected that the annual rent payable by Grandis from September 2006 will be substantially greater than £650,000.
As part of the terms for the grant of the Lease in 2000 Grandis' obligations under the Lease were guaranteed by Southern, a member of the Red Sea group, which at that time owned Grandis. In 2000 Grandis became part of a joint venture between the Red Sea group and Elbit Imaging Ltd.("Elbit") and Elbit entered into an indemnity with Southern in respect of Elbit's share of Grandis' obligations under the Lease.
In July 2007, immediately prior to its admission to AIM, Park Plaza acquired the Red Sea group's interest in the joint venture with Elbit (including its 55% interest in Grandis), but the release of Southern's guarantee of Grandis' obligations under the Lease was overlooked.
On 31 December 2010 the Park Plaza group acquired Elbit's interest in the joint venture and as part of that agreement Southern released Elbit from its indemnity in respect of Grandis' obligations under the Lease. Accordingly, Southern became the sole guarantor of Grandis' obligations.
On 26 November 2010 the joint venture between Elbit and Park Plaza refinanced its facility from Goldman Sachs with new £179.4 million loan facilities from Aareal Bank AG ("Aareal"). It was not practicable to grant security over the Sherlock Holmes at that time, because of the need to obtain the consent of the freeholder, Central London Investments Limited ("CLIL"). Accordingly, the part of the Aareal facilities relating to the Sherlock Holmes currently bears interest a higher rate of interest (5.0% per annum over 3-month Sterling LIBOR) than the rest of the Aareal facilities. This rate of interest will reduce to 2.95% per annum over LIBOR on the grant of security over the Sherlock Holmes to Aareal. As a condition of its consent for Grandis to grant security over the Lease to Aareal, CLIL requires Southern to acknowledge that its guarantee of Grandis' obligations under the Lease remains in full force and effect.
As a condition of Southern agreeing to give the acknowledgement required by CLIL, Southern (which no longer has any interest in Grandis or the Lease) requires that the Company provide it with an indemnity in respect of any liability Southern may incur in respect of Grandis' obligations under the Lease. The giving of such an indemnity constitutes a related party transaction under AIM Rule 13, because Mr. Papouchado (the Chairman of the Company) and members of his family are interested in Southern and Mr. Ivesha (the Chief Executive Officer of the Company) is treated, for the purposes of the City Code on Takeovers and Mergers, as acting in concert with interests associated with Mr Papouchado.
The Directors of Park Plaza, with the exception of Mr. Papouchado and Mr. Ivesha, having consulted with the Company's nominated adviser, Investec Bank plc, consider that the terms of the indemnity are fair and reasonable insofar as Park Plaza shareholders are concerned.
Contacts:
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Park Plaza Hotels Limited |
+31 (0) 20 717 8603 |
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Chen Moravsky, Chief Financial Officer |
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Hudson Sandler |
+44 (0)20 7796 4133 |
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Wendy Baker / Kate Hough |
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Investec Bank plc |
+44 (0)20 7597 4000 |
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James Grace |
Notes to Editors
About Park Plaza:
Park Plaza Hotels Limited is owner, operator, developer and franchisor of hotels in Europe, the Middle East and Africa. The majority of the Group's hotels operate under the Park Plaza Hotels & Resorts brand (part of Carlson Hotels Worldwide), over which the Group has exclusive rights in 56 countries in EMEA, or art'otel, a brand which the Company fully owns. Park Plaza also manages the luxury all-suite Plaza on the River- Club and Residence, London.
Through its strategic partnership with Carlson, one of the world's largest travel and hospitality companies, Park Plaza has access to Carlson's powerful reservation and distribution system, airline partnerships with 20 airlines, loyalty programmes such as Club CarlsonSM for guests and look to book® for travel agents and cross-selling opportunities.
The Group currently has 26 Park Plaza hotels and art'otels, with over 5,600 rooms in operation. New projects under development include Park Plaza Nuremberg (2012), art'otel amsterdam (2012), a 60-room extension of art'otel berlin city center west (2012) and art'otel london hoxton (2013).
Park Plaza also part-owns and operates Arenaturist, one of Croatia's leading hospitality companies located in Istria. Arenaturist consists of three resorts in Pula and Medulin and offers 8 hotels and 5 aparthotels with over 2,800 rooms and 7 campsites.
Park Plaza's shares are admitted to trading on AIM, a market operated by the London Stock Exchange.
Euro Plaza Holdings B.V. (a company ultimately controlled by Mr Eli Papouchado, the Company's Chairman, acting in his capacity as trustee of an endowment established for the benefit of members of his family) and Molteno Limited (in which Mr Boris Ivesha, the Company's CEO, is interested) are deemed to be acting in concert for the purposes of Rule 9 of the City Code on Takeovers and Mergers (the Code). Together they hold more than 50% of Park Plaza voting rights and (for so long as they continue to be treated as acting in concert) may accordingly increase their aggregate interests in shares without incurring any obligation under Rule 9 to make a general offer, although individual members of the concert party will not be able to increase their percentage interest in shares through or between a Rule 9 threshold without Takeover Panel consent.
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