Banks are planning to sell some of their hotel debt to overseas institutions because they believe they can get a higher price for some of the better-performing ones than they will from Nama, according to property and corporate finance sources. US distress funds in particular have been targeted as buyers of the debt, especially for the few that are trading profitably.
Most of the banks have written down the value of their hotel debt by 60% but don't want to take that hit so are instead looking for other buyers. Three- and four-star hotels, which were bought for €150,000 a room during the boom, are now valued at €60,000 a room, a source said.
An oversupply means that most hotels in Ireland are unprofitable and the working capital required to cover the losses will not appeal to Nama or other buyers, the sources said. Investors are unwilling to close many of them because there would be a clawback of the tax breaks granted to them during their construction.
Hotels also require significant ongoing expenditure on maintenance and regular refurbishment. One Dublin city centre hotel needs about €40m of investment to bring it up to the required standard, a source said.
A quarter of the hotel rooms in Ireland need to be closed down because the sector is insolvent, economic consultant Peter Bacon recently said.