Investigators Called in to Probe Essen Hotel Loan
After Von Essen Hotels defaulted on its interest last month, Ernst & Young administrators have tapped the London Police to probe the multi-million loan earmarked for the restoration of the Essen hotel.
The concerns were raised after Ernst & Young found accounting errors in Essen hotel, particularly the loan, which is believed to amount to £30 million, that has been spent in the lead-up to the company’s collapse.
The loan was said to have been earmarked for the upkeep and capital expenditure of Essen hotel.
Meanwhile, Whitbread, said to be the biggest hotel operator in Britain, sustained a sluggish growth of sales in the first quarter of 2011, with expected slow recovery in consumer confidence which would eventually drag its shares down.
Essen hotel allegedly breached its loan covenant that allows for a minimum level of controlled earnings when the group sustained tough trading conditions amid economic downturn.
On the other hand, Ernst & Young administrators will find out whether the £30 million loan was spent on Essen hotel fabrics or on saving the business, including the costs of its interest.
The City of London Police is yet to confirm if it would conduct an investigation into the matter.
The Essen hotel, owned by Andrew Davis, includes Mount Somerset hotel in Taunton, Congham Hall hotel in Norfolk, New Park Manor in Hampshire, Thornbury Castle and Cliveden.
Last month, Von Essen Hotels went into administration after Lloyds and Barclays called in Ernst & Young to keep up the interest payments of the failed business, which already amounted to £250 million.
Affected businesses include the holding companies von Essen Hotels Limited and von Essen Hotels 1 Limited.
Angela Swarbrick, Ernst & Young joint administrator, confirmed that the rest were saved from going bust and now trade as usual.
The administrators, tasked with assessing the value of the business, is expected to come up with a different figure from the latest valuation of Essen hotel at £430 million.