Bond analysis: Henri Broen Holding BV offers 7.50% pa – Company realizes four-star plus boutique hotel | 05/11/20

Henri Broen Holding BV issues a 5-year secured bond with a coupon of 7.50% pa and a volume of up to EUR 25 million. The company would like to use the proceeds from the issue to develop the four-star plus boutique hotel & spa Amalia from the Koningsbosch monastery, which was built in 1874. In addition to the realization of the heritage hotel, the project includes two other sub-projects: the construction and sale of 45 villas and the sale of a plot of land on which a supermarket is to be built. The bond will be placed with institutional investors as part of a private placement. The minimum order is 100,000 euros. From November 10, 2020, the bond will be listed in the Open Market with a denomination of EUR 1,000 and can then also be purchased by private investors. An extensive collateral and trust concept speaks in favor of an investment.

The project
The core of the Koningsbosch project is the rededication of a monastery built in 1874 into a four-star boutique hotel with spa in the style of a so-called heritage hotel, which is operated like a resort hotel. The second sub-project includes the realization of 45 villas, each with 120 to 180 square meters of living space. In the third sub-project, the company is selling a plot of land on which a supermarket is to be built in the near future. The villa park and the supermarket make the historic building complex even more attractive. The hotel complex is particularly suitable for weddings as well as corporate events and seminars.

Koningsbosch is located in the Maastricht / Aachen region, very close to the Roermond designer outlet, which attracts more than 7 million visitors a year. There are several golf courses in the area. The hotel is scheduled to open in May 2023. The bond is to be repaid in 2025 by selling the hotel to an investor.

Collateral
The company grants the bondholders, represented by the trustee, a first-rate mortgage on the monastery and the attached property. The 45 villas and the supermarket are excluded, as these are to be sold first. The trust concept ensures that the sales proceeds from the villas or the supermarket and other operating and rental income are available to the bondholders to service the coupons.

Use of funds
The funds from the bond issue are to be used to replace mezzanine investors (10 million euros) and to finance the renovation of the monastery (13.5 million euros). The company has included a financial buffer in its planning, so a subsidy of 2.5 to 4 million euros is expected in the coming year, which does not have to be repaid.

Strengthen:
– currently the highest coupon of all new issues
– Comprehensive collateral and trust concept (with first-rate land charge)
– experienced management team
– Selling the land (for the supermarket) and villas bring high margins and liquidity

Weaknesses:
– Negative capital market sentiment, no minimum issue volume, bond capital may not be sufficient
– typical project finance risks

Conclusion:
Henri Broen Holding BV is planning to realize an impressive hotel project. The sale of the other sub-projects (plot of land for the supermarket) and villas bring high margins and liquidity. The company offers a comprehensive collateral and trust concept and the currently highest coupon of all new issues. Risks are primarily to be seen in the currently negative capital market sentiment, so further financing could possibly be necessary. Overall, the bond appears interesting for risk-conscious investors.

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Photo: © Henri Broen Holding

Key data of the Henri Broen bond

Those: fixed-income.org – The platform for investors and issuers in the bond market.

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