To be able to act effectively when the relationship went sour , Ioana Knoll-Tudor , partner , Jeantet , said : “ Make sure that there is a dispute resolution clause in your contract . I know this may seem rather obvious , but trust me , it ' s not . You also need an arbitration clause and it ' s really important that the arbitration clause is operable .
“ And then you have the escalation clauses because of course , you could go to war , and we are always ready for that . But it ' s always in the best interest of the client to try to find a settlement , a solution which is out of court .”
Knoll-Tudor advised against going straight to arbitration in the case of a conflict , commenting that going through the process allowed both parties to either find a solution or give them the time to build a considered case .
She added : “ There is no solution that fits all cases . There are advantages to arbitration , there are advantages to litigation .
“ One point to consider when you make your choice is that in a sector , which is rather limited as the hospitality sector is , confidentiality is extremely important because the number of actors interacting in this market is rather limited and people know each other , they may be working together . If not now , then in five years from now .
“ The other point is the cost of arbitration , which we all know , is rather high . So of course , if the amount in dispute is not very important , it doesn ' t really make sense to go for arbitration .”
Representing the creditors ’ perspective , Kumar Tewari , Partner , Head of Banking EMEA - Katten Muchin Rosenman UK , underscored the importance of strong relationships , particularly in the current period of limited cash flow .
He said : “ A well-advised creditor is one that will take a deep dive into the due diligence on these agreements because ultimately , debt is the spine that runs through the successful delivery of these schemes .”
He added : “ Occupancy rates have been hit really badly . And there ' s been a steady , but very slow return to the sector , so it ' s been difficult to test covenants , it ' s been difficult for borrowers .
“ And one of the first things for any borrower that ' s in default is to be realistic , to talk to your creditors , to strike a new deal with your lenders to figure out whether there is the ability within the documentation within the credit appetite to relax those covenants .
“ What will it take for the lender to increase its loan to value ? Do you need a different type of lender involved in the debt capital stack ? Can you talk to your lenders , can you restructure your facility , can you relax your covenants ?”
He advised : “ If the owner doesn ' t already have it , teaming up with a strong operator may provide that sort of level of credit appetite that a new lender would consider would potentially bring an asset back to life .”
Safety in brands ? Don ’ t forget to read the small print .
About the author Katherine worked as a journalist with 20 years of experience in the hotel sector , working for publications including the FT , Business 2.0 and the leading hotel B2B titles as well as writing her book , Checking Out - What the Rise of the Sharing Economy Means for the Future of the Hotel Industry , published by Bloomsbury . In 2021 she co-launched NewDog PR .
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