Goldman ties up £544m deal to buy Queens Moat

After a decade of financial difficulties that have seen the company crippled by debt, investigated by the Department of Trade and Industry and its shares suspended, the hotels chain Queens Moat Houses yesterday announced a £544m takeover deal by Goldman Sachs.

The deal gives a return to both bondholders and shareholders. Only in May both groups were warned it was likely they would get nothing back from the business.

Goldman Sachs, through its Whitehall global real estate fund, has offered to buy QMH's junior debt and its outstanding shares. It has already got agreement from 41 per cent of junior debt bondholders, who will get 90p back for every £1 of debt. Whitehall owns 34 per cent of QMH's junior debt, bringing its stake to 75 per cent after yesterday's deal. The remaining 25 per cent of junior bondholders have been given two weeks in which to accept the offer.

Goldman needs 98 per cent to accept for the deal to go through. Shareholders are being offered 1p a share.

QMH's financial troubles date back to the early 1990s, when it struggled with a complex debt structure. Shares were suspended for the second time in 10 years in October 2003 pending talks with creditors. A new senior management team, led by Steven Marshall as chairman, came on board in November and undertook a strategic review. They had planned to sell QMH's UK, Dutch and German divisions separately but Goldman's offer for the group won out.

Senior lenders, which hold about £220m of debt, had already agreed to receive 110p for every £1 of debt. But the junior debt holders - which hold about £230m of debt - were holding out for more. Mr Marshall said: "This has been a lengthy process, but we believe we have got the best valuation for the business and we have got something for all stakeholders."

A 10-year investigation by the DTI into the financial affairs at QMH finished in June with three former directors of the group disqualified from holding board positions for up to 10 years. A fourth director, John Bairstow, who founded QMH in 1969, was ruled to have created a culture dependent on "unacceptable accounting". He is contesting the report's findings.