InterContinental Hotels Group (IHG) has received a notice of event of default and termination from Service Properties Trust (SVC).
The notice has been issued as IHG failed to pay around $8.4m required priority return to SVC for this month.
The termination date has been set at 30 November 2020 and covers IHG agreements covering 103 hotels in 30 US states, the District of Columbia, Ontario, Canada and Puerto Rico.
The hotels include three InterContinental, five Kimpton Hotels & Restaurants, 11 Crowne Plaza, three Holiday Inn, 20 Staybridge Suites and 61 Candlewood Suites.
SVC’s agreements with IHG are valid till 2036 and require $216.6m annual minimum returns and rents.
According to SVC, IHG’s $100m security deposit has also been used up.
Further, IHG has to pay nearly $17.4m priority return on 1 August this year. The sum required to pay to avoid termination may increase in case IHG fails to pay this amount.
IHG now has 30 days to avoid termination and pay the amount including accrued interest to SVC.
SVC president and CEO John Murray said: “We hope IHG cures this default so that we can move forward without a termination and rebranding.
“However, it is important to SVC that we enforce our agreements and seek to protect our bargained-for cash flows so that we can pay SVC’s operating costs and other obligations without interruption.
“Furthermore, if IHG is not prepared to continue paying us our returns on these important assets, we believe that the rebranding of these hotels with Sonesta will benefit SVC as an owner of Sonesta, create greater flexibility in managing these hotels through these challenging market conditions and may have a positive impact on these hotels’ performance during their expected recovery.”