Thistle pays shareholders to build up debts
Thistle Hotels has released details of its plan to return £185m to its shareholders.
Plans for the distribution were first announced last month after the collapse of takeover talks with Nomura, the investment bank.
The shares will be distributed in two stages for tax reasons. In the first, £93m will be paid next month through a bonus issue of shares. The second block of £92m will be returned, probably through a special dividend, in April next year.
The group said it was making the move because it had developed an "inefficient capital structure" after selling 30 hotels to Lehman Brothers last month.
The firm's "gearing" (debt as a proportion of the value of the company), was nearly 30% and now stands at 20%, which is "ridiculously low" according to Hartley Sutcliffe, finance director of Thistle.
"In the UK it's cheaper to borrow from banks than from shareholders. It makes financial sense for us to increase the level of debt and re-pay some money to shareholders," said Sutcliffe.
"We can still continue the refurbishment of our hotel bedrooms and maintain a conservative financial structure," he added.
The company is also investigating the possibility of selling three more of its 60 remaining hotels.
