Concern over multi-million pound-loan plan for Coombe Abbey

Concerns have been raised over council plans to borrow money in order to issue a multi-million-pound loan to Coombe Abbey Hotel.



But Coventry City Council’s Labour leaders denied it was bailing out a struggling company, insisting the business was “doing fine” – and scotched parallels with the recently bailed out Ricoh Arena company.

That prompted Tory councillors at the council’s cabinet yesterday to question why the privately-run hotel needed the loan.

They revealed it had been unable to refinance its £6.5million bank loan, prompting the council to step in to buy the loan.

The cabinet heard the deal meant Coombe Abbey Park Ltd, which runs the hotel, would be able to repay to the council the loan it originally took out before the financial crash for a 39-bedroom extention – at much lower interest payments.

The Telegraph revealed the plan yesterday, which was further discussed at in a private section of the cabinet meeting. It will be voted on behind closed doors by all councillors at next Tuesday’s council meeting.

Details of the deal to prop up the four-star 119-room hotel, also used for weddings, conferences and mediaeval banquets, were not disclosed. But the hotel’s last accounts for 2011 showed an outstanding £6.5million bank debt, when profits almost halved to £120,000, partly due to reduced charges for rooms.

The loan will be financed by prudential borrowing – and is thought necessary to “protect the council’s public investment in Coombe Abbey Hotel as a shareholder, landlord, and protect the public asset for the city.”

The council also stands to gain from any future sale of Coombe Abbey Hotel Limited, owned by No Ordinary Hotels under owner/director Gordon Bear.

Labour councillor Lynnette Kelly, cabinet member for business, enterprise and employment, challenged any “impression of Coombe Abbey being in difficulties when it isn’t”, adding: “The hotel business is doing fine.”

But ex-Tory council leader Ken Taylor said: “I am at odds with Lynnette Kelly when she says the hotel is operating financially correctly.”

He asked if leaders had a limit to their borrowing, as Tory leader John Blundell said he was concerned about the risk to taxpayers of the hotel being unable to repay the loan.

He alluded to January’s buyout of Ricoh Arena bank debt, saying he was concerned about senior officers’ time spent on outside private companies.

Coun Kelly said “there was no football team that will pull out of Coombe Abbey” and there had been no problem with the hotel paying its rent to the council as freeholder.

The surrounding council-operated Coombe Abbey Country Park is separate from the hotel company.

If the business was "doing fine" it could secure finance relatively easily via other means.

The fact that the Council are intending doing this behind "closed doors" alarms me.

If the Council has that kind of money going begging, there are (IMO) far more needy things to spend the money on in this city.

from me as I currently see/understand the situation.

City council agree to multi-million pound Coombe Abbey Hotel bail out

Coventry councillors have given the go-ahead to provide a multi-million pound loan to Coombe Abbey Hotel – despite ongoing concern over risks to the taxpayer.

Conservative opposition councillors voted for the controlling Labour group’s proposal after winning concessions - including over demands for ongoing scrutiny of the deal, and evidence the loan will be repaid.

Leading Labour councillor Lynnette Kelly allayed fears at Tuesday’s council meeting by pledging to provide more evidence on the finances of the privately owned Coombe Abbey Hotel, and putting in place measures to ensure the deal would be closely monitored going forward, including through a council scrutiny committees.

While the details were heard in private, the Telegraph understands Clydesdale Bank was set to call in the hotel’s loan of around £6.5million, which was taken out for a 39-bed extension prior to the 2008 financial crash.

The council will now buy that loan off the bank - with money borrowing at much lower interest rates - and act as lender to Coombe Abbey Hotel.

Coun Kelly, cabinet member for business, enterprise and employment, told the council it was not the same situation as the controversial £14m council buyout of the Ricoh Arena’s bank debt in January.

She said “there was no football club about to pull out of Coombe Abbey Hotel”, and the hotel company had always paid its rent to the council, unlike Coventry City Football Club.

She said: “This is not a business in distress. It is not a failing company. It’s performing well. However, the financial situation we have at the moment means the loan needs to be refinanced.”

She said the deal would protect rent payments, and the council’s potential return on any sale of the historic four-star 119-bedroom hotel.

It is run by Coombe Abbey Park Ltd and No Ordinary Hotels group, entirely separate to the council owned and managed Coombe Abbey park which surrounds the hotel.

As the Telegraph has reported, the hotel’s last accounts for 2011 showed an outstanding £6.5million bank debt, when profits almost halved to £120,000, partly due to reduced charges for rooms.

Ex-Tory council leader Ken Taylor said the council in 2003 had financed the Ricoh Arena on the “assumption the football team would stay in the Premier League”. He called for evidence that the hotel would be successful going forward.

Tory group leader John Blundell also called for “clarity” over the appointment of a council representative to act as non-executive director on the hotel’s board.

Councillor Kelly is talking out the back of her hat.

If this business was such a good one it wouldn't be going to the Council asking for help, and Clydesdale bank wouldn't be calling the loan in.

I sincerely hope that the good citizens of this city are not going to end up being financially stuffed.