MACDONALD Hotels is selling 27 of its properties to a private equity player in a deal which will clear its bank debt of nearly £190 million.

The Scottish hotels group, the vast majority of which is owned by 72-year-old industry veteran Donald Macdonald and his family, had total debt in excess of £700 million more than 10 years ago, deputy chairman and managing director Gordon Fraser noted.

Mr Fraser revealed the group’s ability to invest had been constrained in the wake of the global financial crisis, which got under way in earnest in 2008, as it cut its debt.

He said: “Since 2008, we have not had a capital expenditure facility from the bank. Any investment we have had in the properties, we have had to pay for that out of our operating cash flow.”

READ MORE: In full: The 27 Macdonald Hotels being sold

The portfolio being sold includes Rusacks Hotel, overlooking the 18th green at St Andrews. This hotel has planning permission for a major extension.

Other Scottish hotels being sold include the Holyrood Hotel in Edinburgh, Houston House in West Lothian, the Inchyra Hotel & Spa near Falkirk, Crutherland House Hotel in East Kilbride, the Loch Rannoch in Perthshire, and the Cardrona Hotel, Golf & Spa at Peebles.

Also changing hands in the deal, which is due to be concluded by the end of August, are the Randolph Hotel in Oxford and the Bath Spa, which are both five-star properties, The Compleat Angler on the banks of the River Thames at Marlow in Buckinghamshire, and the Tickled Trout, off the M6 near Preston.

Mr Fraser, who has a 6.64% stake in Macdonald Hotels, said the deal followed two years of consideration of the options for the group. He added that Cahal Dowds of Deloitte had helped “weigh up a reassuringly high number of serious offers of both refinancing and acquisition”.

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The preferred bidder, described as a “major private equity and real estate investor” without hotel interests at the moment, is not being named at this stage by Macdonald Hotels.

The price being paid for the 27 hotels is not being disclosed. Macdonald Hotels said its bank debt would be below £190m next month. It noted the deal’s completion would enable it to repay in full its current Bank of Scotland debt and invest in its remaining properties, signalling proceeds in excess of the bank debt level.

Mr Macdonald will retain control of 20 hotels and resorts in the UK and Spain, including the four in the Monument business his family owns with Macdonald chief operating officer Gerry Smith.

The four Monument hotels are Pittodrie House and Norwood Hall in Aberdeenshire, the Drumossie in Inverness, and Grange Manor at Grangemouth.

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Mr Macdonald, Mr Fraser and Mr Smith, who is 68, will continue to lead the hotels and resorts business being retained.

These properties include four hotels at Aviemore – the Highlands, Morlich, and Strathspey and the Aviemore Hotel – as well as the Dona Lola, Leila Playa, Villacana, and La Ermita resorts in Spain. Also being retained are five resorts in the UK, Spey Valley, Lochanhully at Carrbridge, Forest Hills at Aberfoyle, Elmers Court at Lymington in Hampshire, and Plas Talgarth at the southern tip of Snowdonia National Park in Wales.

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Other properties that will remain under the trio’s leadership following the disposal are hotels at Forest Hills and Elmers Court and the Swan Hotel at Grasmere in the Lake District.

The Herald: Donald Macdonald will retain 20 hotels in the UK and Spain.Donald Macdonald will retain 20 hotels in the UK and Spain.

Newly published accounts from Macdonald Hotels show it fell into the red in the year to March 29, 2018, with a pre-tax loss of £1.1m, as a result of a £6.6m write-down in the value of Crutherland House Hotel, from £11.6m to £5m. The group's after-tax loss was £2.2m.

Macdonald Hotels had posted a pre-tax profit of £5.6m for the year to March 2017 but this included a £5.8m profit on the sale of land and properties. Macdonald Hotels’ turnover dipped to £153m in the year to March 2018, from £154m in the prior 12 months, with operating profit declining from £11.1m to £9.9m.

Mr Fraser noted Crutherland House had, in the past, made an annual operating profit of around £1.5m but this had slipped to about £250,000 by the 12 months to March 2019, although it was expected to rise to £500,000 this financial year.

Commenting on the financial position of the group after the disposal, Mr Fraser, who estimated the business being retained had about 1,000 staff, said: “What is left is debt-free. It is a different place from where we have been before. It is a very nice place to be but gives us an exciting future with that business.”

Referring to the leadership of this business by Mr Macdonald, Mr Smith and himself, Mr Fraser, who is 61, said: “We will call it semi-retired. We have established a very capable executive team across the resorts business and Aviemore. Our job will be to help them.”

Mr Smith has worked with Donald Macdonald for 47 years and served as the group’s chief operating officer for 18 years. Mr Fraser has worked with Mr Macdonald for 36 years and was finance director at Macdonald Hotels before becoming deputy chairman. All three worked previously at hotels group Stakis.

Mr Macdonald said: “It’s been 30 years since I started the business along with my fellow board members Gerry Smith and Gordon Fraser, and it’s been a privilege to have shared such an incredible journey with both of them and with so many other fantastic colleagues.”

He added: “The board carefully weighed up all the proposals and unanimously agreed that selling the majority of the hotels to a new, well-funded investor will enable them to realise their full potential, both as hotels and in terms of the significant development potential on several of the sites. This is excellent news for the 2,200 loyal employees based at these hotels [and] their 190 colleagues in our central support team.”

Mr Fraser said the buyer was acquiring the Macdonald Hotels name, the management platform and the headquarters at Bathgate.

Other hotels included in the sale are the New Blossoms in Chester, Portal Hotel at Tarporley in Cheshire, Craxton Wood in Chester, the Macdonald Manchester, the Linden Hall in Northumberland, the Burlington Hotel in Birmingham, and the Alveston Manor Hotel in Stratford-upon-Avon.

Also part of the deal are the Ansty Hall Hotel in Coventry, the Hill Valley in Shropshire, Leeming House Hotel in Windermere, the Kilhey Court Hotel at Wigan, the Bear Hotel in Oxfordshire, Botley Park Hotel & Spa at Southampton, the Windsor Hotel in West Berkshire, Berystede Hotel & Spa at Ascot, and Frimley Hall Hotel & Spa in Surrey.