How one of Scotland's biggest operators is scaling down its debt

One of Scotland’s biggest hotel operators has reportedly made another £100 million dent in its debt burden after selling land at one of its hotels to a property developer and selling two hotels to its founding family.

Macdonald Hotels went private 12 years ago and, as the Times describes it, "was nearly toppled by its £700 million debt." In recent years, the company has inched back to black by selling off several properties and renegotiating its bank facilities. Macdonald is owned by its executives with founder Donald Macdonald and his family trust serving as the principal shareholder. Lloyds Banking Group agreed to convert its shares into loan notes as part of a re-financing last year.

The company—which has 55 hotels and resorts in the UK, Ireland, Spain and Portugal—is reportedly considering adding residential housing projects in areas including Aviemore, Manchester and Ascot. Gordon Fraser, deputy chairman and group finance director, said the company has already rejected offers worth in the region of £30 million for its land. “Our preferred route is to enter into joint venture partnerships with developers," he told the Herald Scotland. "It then allows us to maximize the income and give us a share of the development profit as well.”


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The company's turnover grew seven percent from £145.5 million to £155.7 million in the 12 months to April 2, while operating profit grew 11 percent from £15.3 million to £16.9 million. Pre-tax profit fell from £3.63 million to £2.7 million, which the company said was mainly because of higher interest charges as a result of the accounting treatment of a lease.

The privately owned business also shaved around £96 million off its net debt in its most recent financial year, boosted by the £58 million sale of land at the Macdonald Botley Park Hotel, Southampton. The Macdonald Old England Hotel at Windermere and the Macdonald Marine Hotel in North Berwick were sold to business entities controlled by the Macdonald family. They continue to be run by Macdonald Hotels, and the company has an option to buy them back.

Macdonald reported a 6-percent increase in average room rate, while the company spent an estimated £16 million on its collection, including renovating 261 rooms at the Aviemore Resort. It will likely spend around £14 million on its hotels in the current financial year, but is not looking to buy any more hotels.

The paper claims that Macdonald's total net debt should stand at around £204 million at the end of 2015, down from £300 million in March.