Structured Banking Solutions & MBO s Presented by: Owen Travers

Transcription

1 Structured Banking Solutions & MBO s Presented by: Owen Travers 8 th June 2015

2 Two Aspects Structured Solutions What Next

3 Our Experiences in the last 12 months Large number of hotels in receivership/loan sale portfolios and the remainder are likely to be brought to market in the next year. Exiting / Exited institutions have sold large hotel exposures to Funds. These borrowers need to be re-banked/exit. Trading is improved and hoteliers deserve huge credit for this. Level of financial / margin management and marketing has significantly improved. Equity funding availability has improved

4 Banking Solutions for the Sector

5 Banking Solutions for the Sector Key Products Lending Criteria & Assessment Situations we have encountered Two Relevant Examples

6 Key Products Capital Expenditure & Refurbishment Working Capital Large Payments Loan Finance

7 Capital Expenditure & Refurbisment Area of significant focus within AIB. Why? Traditional FF&E reserve not present in last 5 years. Rate Growth less likely without it. Can provide a competitive advantage. Weddings/Functions/Conference/Meetings Bridal Suites/Bedroom Facilities & Quality TripAdvisor negative comments on state of repair. Weighing on valuations and financial performance.

8 Capital Expenditure & Refurbishment Asset Finance Hire Purchase Finance Leases Operating Leases CapEx Loans

9 Working Capital & Cash Management Day to Day Traditional Overdrafts Manage inter-month & seasonal requirement Corporate Credit Cards, Purchasing Cards & Merchant Services Once-off Insurance Premiums Local Authority Rates Audit & Professional fees Deferred over a 10 month period with Prompt Pay Commercial Finance - Invoice Discounting Not suitable for hotels but used by your debtors

10 Loan Finance Loan Finance is available Typical Uses Acquisitions Capital Expenditure Refinancing As with all lending products, a credit assessment is required.

11 Loan Assessment Summary of information required to support credit applications include: Business Plan Details of your business strategy Demonstrate the purpose of your proposal / how credit will be used Financial Information to support your credit application Most recent audited accounts Management accounts 3/5 year projections: cash flow, P&L, and balance sheets Certified asset / liability profile Confirmation of personal & business tax affairs

12 Loan Assessment What Are We Trying To Assess? Sustainable level of EBITDA after allowing for CapEx Why? To identify the serviceable level of debt that can be repaid over the short/medium/long term We are not typically making lending decisions based on valuation reports/ltv s but Security is typically required.

13 The message remains. Every situation is different Cashflow v. LTV Focus Engage early and build a relationship High Quality Disclosure & Business Plans

14 Situations we have encountered Debt Purchase/Sales Refinancing of Exiting Banks Acquisition Finance Mezzanine Finance Development Funding

15 Debt Purchase/Sales Most common exit for Exiting Banks & IBRC Loan is sold to Fund/Bank/Financial Party Requires AIB to execute Bank to Bank or instantaneous refinancing to assist customer. Costly & requires legal, lender, accounting, tax and good advisors.

16 Refinancing Exiting Bank Structurally Complex Timeframe driven Risk to current owners Need cooperative exiting bank or new Fund Generally require to give a loan discount

17 Acquisition Finance On Market Off Market SPV s, QAIFS, QIFS, REITS

18 Mezzanine Structures Bridge Equity/Debt Gaps Friends & Family Institutional Mezzanine Requires Intercreditor & Subordination Agreements Owner needs a clear exit plan

19 Focus on one example MBO/Mezzanine

20 We want to see MBO/OBO s happening Loan sold by Exiting Bank to a Fund Borrowers/GM s unhappy as fear of Loan to Own How do they execute?

21 The MBO You can raise friendly equity You can t raise equity Funds need to know your skills Looking for an equity carry Might take one or two cycles

22 MBO All about funding the Gap Senior Debt Level Offered Gap Exit Price for Legacy Lender/ Receiver/ Fund

23 Structure Mezz Equity Legacy Debt 22.2m 22.2m Exit Value Requested 16.8m 16.8m AIB Senior Debt 12.6m 12.6m Gap 4.2m 4.2m Bridged by. Company Cash 0.6m Owner Funds 1.8m 0.6m Equity 3.6m (% Equity Negotiate) Friendly Mezz 1.8m - Total 4.2m 4.2m

24 Equity Calculation Y0 Y1 Y2 Y3 Y4 Y5 Y6 EBITDA 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Interest (500) (500) (500) (500) (500) Capex (300) (300) (300) (300) (300) Principal (1,000) (1,000) (1,000) (1,000) (1,000) Cash Debt Amount 11,600 10,600 9,600 8,600 7,600 Cash Balance 700 1,400 2,100 2,800 3,500 Net Debt 12,600 10,900 9,200 7,500 5,800 4,100 13,058 Equity Return 4,320 5,184 6,221 7,465 8,958 20% Net Debt/EBITDA

25 Result Ownership within a 5 year period

26 What Next. AIB continues to invest in adding value The Irish Hospitality Industry AIB Customers How? -Innovation

27 Great Escapes Expo

28 We increased our engagement & support AIB Hotel Sector Report May 2013 IHF/Fáilte Ireland Finance Workshops March 2013 AIB Energy Efficiency Report December 2013 MML 1 st Equity Fund November 2013

29 AIB Mezzanine Fund Now an Active Player Lending to Irish Hotels

30 Data Analytics Macro Analysis for the benefit of Irish Hospitality Micro Analysis for the benefit of AIB customers

31 Macro Some Examples

32 Micro Some Examples

33 Thank You