Corinthia Group is going to the market for the second time this year as subsidiary Corinthia Finance plc issues a €20 million, 6.25 per cent 10-year bond in mid-September.
After the €30 million bond issue by International Hotel Investments plc in June, Corinthia's finance company will channel the net proceeds from this issue - which has an over-allotment option of an additional €5 million - to mainly redeem the outstanding balance on the 6.7 per cent 1999 bond and the rest into general group financing. The 2,530 holders of that bond will be given preference to roll-over their investment. The bonds are guaranteed by Corinthia Palace Hotel Company Ltd, the group's parent company The sprawling hotels and real estate group has shown no sign of slowing down despite the world recession, forging ahead with its ambitious expansion plans. It currently has international projects worth €850 million under development.
After consolidating the brand's presence on the central and eastern European map, Corinthia aims to fly the flag with luxury hotels in major cities as it works towards its vision of becoming a global player.
"London has become a reality. We are now also actively seeking to have a presence in Paris," Corinthia Finance plc chairman Joseph Fenech told The Sunday Times.
"Continuing to grow the Corinthia brand with properties at the luxury end is one of our main objectives. To fuel the expansion we need to have further funding so we are pursuing the growth of International Hotel Investments. We have been waiting for the opportune time for a secondary listing for IHI and we hope that will happen soon."
The short-term milestones which have been reached are staggering. In the past 36 months, Corinthia has raised over €400 million in new equity and debt. In June 2006, the group convinced Kuwaiti real estate investors to invest €24 million in one of its subsidiaries; that December, hotel group Wyndham were roped in to a joint venture with CHI, Corinthia's hotel management company, and awarded CHI exclusive use of two brands across Europe, Africa and the Middle East.
In May 2007, Nakheel Hotels of Dubai invested €178 million in the group and three months later, a €15 million bond issue was oversubscribed. The former Metropole Hotel in London was purchased in February 2008 while the first memorandum of understanding was signed for the Benghazi property.
Last May, the Corinthia Hotel St Petersburg was reopened after a €100 million revamp and extension and a €150 million loan for the development of the London project was secured from an international banking syndicate.
Providing an update on major projects, Mr Fenech explained that the 296-room Corinthia Hotel London is "on schedule" for its planned opening on October 10, 2010. The main contractor has been appointed and the final set of sample rooms is nearing completion. The demolition and strip-out has been finished with savings of £110,000 registered on this phase of the project. The designs of the exclusive spa and restaurants have been finalised, and celebrity chef Massimo Riccioli (of Rome's La Rosetta fame) has been appointed to run the specialty restaurant.
The final plans for the €100 million 250-room Corinthia Hotel and Residences Benghazi are currently awaiting approval. The perimeter walls are under construction and the various land plots are being bundled for the final transfer to be made to IHI Benghazi, the subsidiary company which will own the property. The Benghazi project also incorporates 30 residences and 4,000 square metres of office space.
Palm City Residences in Janzour is already home to 22 expatriate families as the project gears up for its official inauguration in a few weeks' time. A further 67 units in the 413-residence village have been reserved and lease deposits paid. Lease terms have been agreed on a further 120 homes.
The commencement of works on the substructure of the €275 million Medina Tower is just weeks away. The mixed-use development on what is rapidly becoming Tripoli's Golden Mile is just a stone's throw away from the Corinthia Bab Africa Hotel and architectural designs should be complete by February. The development will feature 336 residences for sale, including a cluster of 300-square metre sky villas complete with pool and sun terraces, 25,000 square metres of office space for rent, three floors of retail space totalling 13,000 square metres, and 750 parking spaces. Medina Towers is expected to be completed by January 2013.
"A sleeping giant is awakening while the rest of the world is in recession. The opportunities in Libya are enormous," Mr Fenech pointed out. "It is one of the most stable countries in the region. After its isolation from the international scene when the sanctions were imposed, the country acknowledges that it needs to move ahead with the times and it is managing that process very well. The momentum will only accelerate."
Corinthia's expertise in doing business in Libya is a major forte. Since the change in the company's shareholding structure in the 1970s to integrate Libya's LAFICO, the group has a successful track record of investment in the country. The success of its business ventures has stemmed primarily from its foresight in identifying demand well before the competition.
When the Bab Africa was opened business travellers were finally able to stay at a five-star hotel that was often superior to hotels in Europe. Palm City Residences also present a first: nowhere else in Libya are expatriates able to enjoy homes with luxury amenities and state-of-the-art technology and entertainment facilities, finally free from the logistical nightmare that living in Libya often presents. And word among the expatriate professional and business community is spreading fast.
Since Corinthia Palace Hotel Company Ltd issued its first bond in 1999, its consolidated asset base has grown threefold to €1,216 million, and its equity fourfold to €378 million. In the same period, its liabilities have doubled to €575 million.
In 10 years, as the global economy experienced one monumental crisis after another - September 11, SARS, the worst recession in 80 years, and swine flu - all with serious consequences for its core tourism business, the company's equity-to-debt ratio has gone from 33:67 to an ideal 53:47.
"We are more conservative in our funding methods," Mr Fenech explained. "We now boast a strong balance sheet and we have also reduced our level of debt to make it more manageable in case of a prolonged downturn in business. We work differently. Each development we undertake is fully funded before we commence. The equity portion is upfronted and the rest of the project finance is secure before we proceed."
Mr Fenech said he expected global tourism movements to show signs of recovery by the second half of next year. Corinthia's properties boast between 250 and 400 rooms and several were dependant on conference and incentive guests. Despite a decline in spending in the meetings, incentive, conference and events niche as corporations cut their budgets, Mr Fenech said the group's global spread helped soften the downturn's impact as some markets performed better than others. Significantly, the brand has also managed to preserve its room rate, as major chains resorted to considerable reductions in rates.
The group's hotel business, Mr Fenech pointed out, was now in a position to take advantage of the upturn as soon as it happened.
Corinthia bond holders have until September 14 to register their interest in the new issue. Subscriptions to the public open on September 15 and will close on September 18 or earlier. Corinthia Finance plc is compensating the difference between the interest receivable on the 6.7 per cent maturing bond and that receivable on the 6.25 per cent 2019 bond for the period September 23 to October 30, 2009. The lower coupon rate on the new issue reflects current market conditions. The bond is jointly managed by HSBC Bank Malta and Bank of Valletta, which is also the bond registrar.