Corinthia owners IHI appoint advisers to navigate Russian sanctions

Maltese hotel chain International Hotel Investments has engaged international legal advisers to assist in managing the situation that sanctions on Russia have brought about

The Corinthia hotel in St Petersburg
The Corinthia hotel in St Petersburg

The Maltese hotel chain International Hotel Investments has engaged international legal advisers to assist in managing the situation that sanctions on Russia have brought about.

IHI, which operates the Corinthia Hotels brand, operates a hotel in St Petersburg, which has a net asset value of €84 million.

“The situation regarding these sanctions and any counter-sanctions that Russia itself may impose on the international community is continuously developing. The consequences these sanctions could have on the group are difficult to determine,” IHI plc said in its financials for 2021.

In 2021, IHI achieved operating results before depreciation and fair value of €26.5 million as compared to a loss of €3.8 million in 2020, prior to approximately €23 million to cover interest on bonds and bank loans, giving a total cash loss of €26.8 million for 2020.

IHI owns a hotel in St Petersburg with an adjoining commercial centre which have been in operation for a number of years. Both the hotel and the commercial centre remain operational.  IHI’s interest in St Petersburg represents approximately 8% of the Group’s total revenue and assets.

It said all customers in 2021 in the St Petersburg hotel were almost exclusively from inside the Russian Federation, a situation that is expected to continue well into 2022 given severely curtailed flight schedules and international sanctions on Russia. “On the other hand, on a purely factual basis, current demand and bookings into this hotel remain at the same pace as was prevailing in 2021,” IHI added.

“Depending on the duration of this conflict, this may have an adverse effect on operations. Negative effects on traffic patterns are possible and these could extend to neighbouring countries in which the group has operations.

“Apart from business disruptions which may materially influence the valuation of the hotel and commercial centre, this situation materially increased the volatility of the Rouble exchange rate and may impact the amount reported in the group financial statements.”

CEO Simon Naudi said IHI’s other investment in Moscow continues, namely a Corinthia Hotel & Residences development on the city’s main boulevard. IHI has a 10% share – $6 million – in this project and will eventually also manage the 50-key boutique luxury hotel and provide branding and service to the 100 residential apartments planned for the site.

“In 2021, discussions proceeded by this company with funding banks, authorities and contractors with a view to commencing works later in 2022. The current situation in Russia means we will report back later in the year when a way forward may become clearer,” Naudi said.

At 31 December 2021, the IHI reported having access €165.1 million in total liquidity, comprising €62.9 of undrawn facilities and €102.1m of cash balances. “This strong position will also enable the Group to support its operations in St Petersburg which is operating in a curtailed environment following the imposition of international sanctions on Russia as a result of the conflict in Ukraine in 2022,” IHI said.