Champneys is a group of companies (one company per property asset) that owns and runs luxury spa and hotel groups.
In 2005 Champneys moved its banking away from RBS because RBS had started to treat the business in an unhelpful way. Lloyds encouraged Champneys away with the promise of more ethical banking.
Lloyds imposed a condition of hedging in its lending criteria. Champneys already had a £16 million interest rate swap with RBS. Lloyds ordered Champneys to break the swap (which was in the money, so Champneys received £596,000) and enter into a new swap, which was necessarily out of the money.
In 2011/12 Lloyds’ attitude to Champneys changed. It started making ever increasing demands of the company. Champneys could not understand this change. Eventually Lloyds demanded a new valuation of the whole group.
The resultant valuation of the group holdings were significantly lower than Champneys expected. The valuation carried out by Christie & Co in July 2012 valued the business at £39,450,000, £36,700,000 or £27,900,000, but Christie & Co believed the group would be sold for £50,000,000 if marketed. There is no explanation of why it believed a group valued at a maximum of £39,450,000 would sell for £50,000,000.
The managing director of Champneys, Mr Stephen Purdew, refused to accept the valuation. He also refused to accept the threats from Lloyds. He knew Champneys was worth in the region of £68 million, not the £27,900,000 stated by Christie & Co. He informed Lloyds of this, who stated that under the terms of the lending, they were entitled to rely upon the valuation from their panel member valuer. Mr Purdew also spoke to associates of his in the hotel industry who all had had the same Lloyds-effect valuations whereby Lloyds devalued the business to such an extent that they had no option but to agree to new lending arrangements which were counter-productive to the best interests of the companies.
Mr Purdew approached Santander. Santander instructed a valuer, whose valuation came back as a single valuation figure (rather than the odd Lloyds-effect valuation of three different figures) on 25 December 2012 and which valued the business at £56,700,000. Mr Purdew remains of the view that the true value of the business is in fact £68 million.
The Lloyds valuation suggested that the business was insolvent and Champneys met with members of Lloyds Business Support Unit (“BSU”) on Thursday 12 July 2012. Lloyds advised that due to the revaluation Champneys the BSU would be taking over the day to day handling of Champneys accounts.
As a result of the actions of Lloyds, Champneys re-financed their facilities with Santander Bank. Mr Stephen Purdew avers that Santander were of the opinion that Champneys was a highly solvent business and as such they refinanced the entire group. Champneys continues to provide some of the greatest and most luxurious spa resorts in England. However as a result of the actions of Lloyds Champneys has incurred significant cost associated with re-financing their facilities with Santander.