The cancelled deal with Asian airline titan HNA has led to Spanish hotel chain NH to exceed their debt limits for 2011, and NH could fail to meet banking obligations for yet another year. The chain, managed by Mariano Pérez, ended the first eleven months of last year with a net debt of 987.8 million euros, equivalent to 5.02 times its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) registered through November.
This puts the company in an unsettling position, and they are unlikely to meet commitments set by financial lenders, or covenants, that are requiring NH to close the year with debt no greater than 3.75 times EBITDA.
The absence of the 329 million euros with which HNA was going to make by buying twenty percent of NH puts the Spanish hotel chain in a situation of reducing its financial obligations by 231.8 million euros in less than one month in order to comply with current contracts. ?We have had a very good November and we are very certain about our ability to meet financial obligations with the banks,? said chain president Mariano Pérez Claver.
Despite the optimism from president Claver, market predictions and the latest published data tell a different story. Market sources claim that NH Hotels is going to close 2011 with debt between 4.6 and 4.5 times EBITDA.
If we subtract the 12 million euros in damages that NH received for the breached contract with HNA and the and the 50 million euros in savings that it amassed after the sale of Hotel Lotti de Paris, the Spanish hotel company could close the year with a net debt of 925 million euros.
