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| The Success Hotel Group operates the ibis Styles Hamburg-Barmbek: a success story, opening in June 2021 and full house on New Year's Eve 2021. / Photo: Accor |
Stuttgart (January 14, 2022). In December, all was still right with the world. Last Monday though, on 10 January, the district court approved the application of Success Hotel Management GmbH for insolvency under the self-administration procedure with the objective of restructuring. Managing Director Michael Friedrich on the background.
The company's situation developed dynamically at the end of last year, Friedrich said. Now, it's about the future of 25 existing hotels and a further 13 either under construction or already with leases signed.
Manfred Friedrich, who founded the company 26 years ago, actively planned his succession with his son Michael Friedrich, who has run the business since 2014. Stephan Kienle also joined the company in November as Co-Managing Director and CFO: an experienced financial expert who previously worked for the German Bundesbank in the area of risk controlling and also has KfW expertise. At the beginning of corona pandemic, the Friedrich family asked Stephan Kienle to support them in crisis management.
In 2019, the turnover of Success Hotel Management GmbH stood at €52 million. The family is considered to be commercially conservative, solid and reliable. Manfred Friedrich had always prided himself on generating the Group's growth from its own cash flow.
Bureaucracy meant considerable delays
Like most companies in the hotel industry, Success Hotel Management GmbH received government support amounting to €16 million from the relevant aid programmes (in particular bridging aid 1-4) in both 2020 and 2021. Further state aid amounting to €5.3 million, which had already been held up in approval process over several months, was still outstanding at the end of the year. The bureaucratic application process by way of an anonymous application portal without a personal contact person, telephone number or e-mail address made efficient communication difficult, Michael Friedrich reports.
Although Success Hotel Management GmbH was already known to the authority and had received permits in the past, five rounds of questions were necessary to prove that the company was indeed a hotel undertaking. Lease agreements, for instance, were requested at several stages. It all involved much unforeseeable delay.
Michael Friedrich and Stephan Kienle then found a partner in a Munich bank that was willing to pre-finance the expected sum (€5.3 million) from the state. The management board and back office approved €4.4 million. They estimated that the probability of default on loan repayment was low. All access requirements for the KfW loan were deemed to have been met and approval was considered a formality.
Suddenly classified as at risk of insolvency
"Two days before Christmas though, we received news from the financing bank that the company had been classified by KfW as at risk for insolvency," Friedrich continues. "And up to today, we're still at a loss to understand why. After all, we've made payment on principal and interest consistently and we were in the black in both the summer and autumn of 2021."
As far as we now at this point, the sole fact that Success Hotel Management GmbH is part of the hotel industry was sufficient for the company to be classified as at risk of insolvency.
Michael Friedrich reacts with incomprehension to the outstanding state aid and the evaluation by KfW: "The state makes big announcements, but the support arrives much too late. The rejection of aid by KfW on the basis of the industry assessment is a bureaucratic decision over which we as a company had no influence."
So how will things go forward?
The Success managing directors immediately brought in a law firm (Menold Bezler) with restructuring experience and other restructuring experts (RIAL Consulting) to analyse the procedure. Success Hotel Mangement GmbH is now embarking on a six- to nine-month restructuring process under the self-administration procedure. Business operations will be continued without restriction under the management of Michael Friedrich and Stephan Kienle. In the case of a restructuring in self-administration, they retain full decision-making power.
This is a sign that the outlook for continuation is positive, as "we have a healthy, structural core and face pandemic-related challenges. All hotels and restaurants are open and can be booked as usual. The daily work routine for the 630 employees also continues." Employees, owners and suppliers have all been quickly informed.
Michael Friedrich is confident: "We are being given an opportunity to reposition our company. Our objective is to implement the operational as well as financial restructuring of Success Hotel Management GmbH sustainably and swiftly and to preserve the jobs." Over the next few weeks, the company will be drawing up a comprehensive restructuring plan. / map
