• Toxic loan vehicle has precedent

The mooted creation by the US Treasury of a vehicle to take over $700bn worth of "toxic loans" is unprecedented in size but not in format.

In the US, there was the 1988 spin-off of Grant Street National Bank which housed the bad loans from Mellon, and in Europe there was the 1992 creation of Securum from the banking crisis in Sweden.

And of course, most recently, Lehman had tried to create a "bad bank" to house all of its toxic loans just prior to its collapse.

Securum housed a number of hotel assets, including a portfolio of 13 UK hotels with 1,300 rooms, inside a division called Securum Hotel Holdings.

The wider Securum had more than 2,000 commercial properties, mostly in Sweden. It was charged with gradually working out the portfolio to maximise profit over a 10 to 15 year period.

In the end, Securum was wound up after just five years, and succeeded in shedding its assets at a profit. Overall, Swedish taxpayers more or less broke even after that country's most traumatic banking crisis.

From a hotel industry perspective, the most helpful thing Securum did was to actively manage its assets to obtain a good price rather than dumping them onto the market, further depressing hotel property prices.

Late Thursday night, both US parties in Congress were reported as having reached agreement on the outline of the bailout plan. While the devil is always in the detail of these things, news that a deal has at least been reached provides hope that markets will begin to settle.

If things do go to plan, presumably AIG's hotel interests will be among the loans injected into the bad bank. The interesting aspect will be to see what other hotel investments are put into the pot by other banks and financial companies that qualify for the scheme.

It is certainly fascinating to drill down to the hotel sector detail of such loans. With Lehman, for example, its so-called toxic loans included its stake in LRG, the portfolio of Holiday Inns in the UK that is the biggest mid market player. This was a £1bn deal struck back in March 2005. If deals done as far back as this are now toxic we are really in trouble.

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