Apollo Global Management won the mandate to make the mezzanine loan, which has been priced at an internal rate of return slightly higher than 7%.
Saudi Prince Alwaleed’s Kingdom Hotel Investments and Lloyds Banking Group opted to refinance an existing facility put in place in April last year with Crédit Agricole CIB and DekaBank ahead of maturity in order to decrease their cost of debt, appointing Eastdil Secured to run the process in July. Credit Agricole and DekaBank had each provided £100m with £70m subsequently sold down to Allied Irish Bank and Santander.
Earlier this month Deutsche Bank was selected as the preferred party for the bulk of the overall £300m refinance, beating five others, including Citibank to the mandate. However, it had not initially been determined whether this would be in the form of a whole loan that would have subsequently involved syndicating a B tranche, or whether, as was ultimately decided, a separate junior loan would be arranged.
The mezzanine loan represents an overall loan-to-value of 82.5%, with Deutsche Bank’s £200m loan at an LTV of around 55%. The margin on the current senior loan is thought to be between 380-400 basis points, but the new margin on the senior debt is believed to be less than 300 basis points.
The mezzanine finance is the second subordinate loan that Apollo has provided behind Deutsche Bank, having issued a £200m loan in May last year as part of a £600m refinancing of Chiswick Park in west London, which at the time was owned by Blackstone.
All parties declined to comment.