SEC Company Response from INTERCONTINENTAL HOTELS GROUP (IHG) — Sep 29, 2009
INTERCONTINENTAL HOTELS GROUP PLC /NEW/
Date: Sept. 29, 2009 · CIK: 0000858446 · Accession: 0000950103-09-002430
AI Filing Summary & Sentiment
Letter
VIA EDGAR United States Securities and Exchange Commission Division of Corporation Finance InterContinental Hotels Group PLC Form 20-F for the Fiscal Year Ended December 31, 2008 Filed on April 7, 2009 File No. 1-10409
Dear Ms. Blye:
On behalf of our client, InterContinental Hotels Group PLC (the “Company”), we are submitting this letter in response to the written comments of the staff (the “Staff”) of the United States Securities and Exchange Commission (the “Commission”) contained in your letter, dated August 20, 2009 (the “Comment Letter”), with respect to the above referenced filing on Form 20-F (the “20-F”).
The Company’s responses are set forth below, with the headings and numbered items of this letter corresponding to the headings and numbered items contained in the Comment Letter. For the convenience of the Staff, the comments from the Comment Letter are restated in bold italics prior to the Company’s response.
General
1.
We note from your website that a new hotel in Syria, InterContinental Damascus, is scheduled to open in 2012. Syria is identified by the U.S. Department of State as a state sponsor of terrorism, and is subject to U.S. economic sanctions and export controls. We note that your Form 20-F does not include disclosure regarding contacts with Syria. Please describe to us the nature and extent of your past, current, and anticipated operations in, or other contacts with, Syria, whether through subsidiaries, joint ventures, or other direct or indirect arrangements. Your response should describe any equipment or services you have provided to Syria, directly or indirectly, and discuss
Cecilia D. Blye
September 29, 2009
whether you have agents or employees in Syria and any agreements, commercial arrangements, or other contacts you have had with Syrian government or entities controlled by that government.
The Company is a global hotels group which operates through various subsidiaries and affiliates in approximately 100 countries and territories worldwide. Through its subsidiaries and affiliates, it franchises, manages and owns hotels under seven different brands. The Company does not have any agreements or commercial arrangements, or other contacts with the Syrian government, entities controlled by the Syrian government, or Syrian persons designated on U.S. or United Kingdom (“U.K.”) sanctions lists.
The Company’s past, current and anticipated operations in, and other contacts with, Syria relate principally to two planned hotels, an InterContinental and a Holiday Inn, both of which are in Damascus, and are described in detail below. Both hotels will be owned by third-party owners and the hotel operations will be managed by the Company in return for management and other fees, as described below. Neither hotel is operational, as both hotels are at the architectural stage and construction has not yet commenced. If the hotels are not constructed, the Company will not receive any management or license fees. In this case, damages may be payable, depending on the circumstances, but such amounts would be negligible within the context of the Company’s consolidated group revenues.
InterContinental Damascus
In 2007, the Company was approached by a privately-owned general contracting company that owns a number of hotels in the Middle East, in connection with the development and operation of a hotel in Damascus, Syria under the Company’s InterContinental brand. The hotel developer, which will own the hotel once constructed, is a Syrian company owned by a Kuwaiti fund.
The InterContinental Damascus project is at an architectural stage with no construction having commenced. The Company has been informed by the owner that it currently anticipates the completion date to be May 2012.
The Company, through a U.K. subsidiary, entered into a Technical Services Agreement (“TSA”) with the owner in May 2007 to provide advice and technical services in connection with the construction of an InterContinental hotel in Damascus, Syria. The Company, through a U.S. subsidiary, entered into a Hotel Management Agreement (“HMA”) in April 2008, pursuant to which such subsidiary of the Company or any other subsidiary of the Company to which the Company would elect to assign the HMA, would manage the hotel, such HMA to be effective once the hotel opens.*
TSA
Pursuant to the terms of the TSA, the Company, through a designated U.K. subsidiary, is currently providing technical services and advice for the construction of the hotel. The Company is acting as a consultant to the owner and provides the owner with the relevant
* This is a standard method of documenting this type of deal in the hotel industry.
Cecilia D. Blye
September 29, 2009
brand standards and hotel technical specifications. Further, the Company reviews technical drawings and advises the owner on the hotel’s functionalities to ensure that the hotel will comply with relevant brand standards. The owner is undertaking the hotel’s construction and no equipment or labor is provided by the Company for the hotel’s construction.
As with most arrangements of this nature entered into by the Company, pursuant to the TSA, the Company is entitled to a technical services fee, in this case, half of which was paid on signing the TSA, a further 25% of which is payable when construction commences and the balance of which is payable on completion. The amount paid upon the signing of the TSA in 2007 (being 50% of the TSA fee) represented substantially less than 0.01% of the Company’s consolidated group revenues for that year.
HMA
Pursuant to the terms of the HMA, the Company will, initially through a U.S. subsidiary, manage the hotel on behalf of the owner. Although not identified at this stage, it is likely that the Company will decide to assign the HMA to another subsidiary of the Company. Once the hotel is opened during the term of the HMA, it may be necessary for the Company, acting on behalf of the owner through the hotel’s General Manager, to procure small operating equipment for hotel operations. All operating equipment required for hotel operations will be locally sourced and paid for by the owner.
Once the hotel opens and operations commence, pursuant to the HMA, the Company will receive: (i) a base management fee, (ii) an incentive fee and (iii) system assessment fees for: (a) the management of the hotel, (b) the use of the InterContinental brand and (c) participation in the Company’s marketing and distribution system. To date, no fees have been received by the Company under the HMA, as the hotel has not yet opened. If the hotel is opened, the Company does not expect that any revenues received pursuant to the HMA would be material to the Company’s consolidated group revenues.
The Company has not invested, does not intend to invest, and will not be required to invest, any of its own capital in connection with the construction or the future operation of the hotel, and will not own any interest in the hotel.
Holiday Inn Damascus
In 2008, the Company was approached by a United Arab Emirates registered private construction group in connection with the development and operation of a hotel in Damascus, Syria, under the Company’s Holiday Inn brand. This construction group is the hotel developer and will own the hotel once constructed.
The Holiday Inn Damascus project is at an architectural stage. The Company has been informed by the owner that it currently anticipates the completion date to be December 2011. Excavation works have started on the site, although structural work has not yet commenced. The Company believes construction may commence before the end of 2009.
The Company, through the same U.K. subsidiary used for the InterContinental Damascus hotel, entered into a TSA with the owner in June 2008 to provide advice and technical
Cecilia D. Blye
September 29, 2009
services in connection with the construction of the Holiday Inn hotel in Damascus, Syria. The Company, through a Hong Kong subsidiary, entered into a HMA in November 2008, pursuant to which such subsidiary of the Company or any other subsidiary of the Company to which the Company would elect to assign the HMA, would manage the hotel, such HMA to be effective once the hotel opens.
TSA
Pursuant to the terms of the TSA, the Company, through a designated U.K. subsidiary, is currently providing technical services and advice for the construction of the hotel. The Company is acting as a consultant to the owner and provides the owner with the relevant brand standards and hotel technical specifications. Further, the Company reviews technical drawings and advises the owner on the hotel’s functionalities to ensure that the hotel will comply with relevant brand standards. The owner is undertaking the hotel’s construction and no equipment or labor is provided by the Company for the hotel’s construction.
As with the InterContinental Damascus hotel and, pursuant to the TSA, the Company is entitled to a technical services fee, half of which was paid on signing the TSA, a further 25% of which is payable when construction commences and the balance of which is payable on completion. The amount paid upon the signing of the TSA in 2008 (being 50% of the TSA fee) represented substantially less than 0.01% of the Company’s consolidated group revenues for that year.
HMA
Pursuant to the terms of the HMA, the Company will, initially through a Hong Kong subsidiary, manage the hotel on behalf of the owner. Although not identified at this stage, it is likely that the Company will decide to assign the HMA to another subsidiary of the Company. Once the hotel is opened and during the term of the HMA, it may be necessary for the Company, acting on the behalf of the owner through the hotel’s General Manager, to procure small operating equipment for hotel operations. All operating equipment required for hotel operations will be locally sourced and paid for by the owner.
Once the hotel opens and operations commence, pursuant to the HMA, the Company will receive: (i) a base management fee, (ii) an incentive fee and (iii) system assessment fees for: (a) the management of the hotel, (b) the use of the Holiday Inn brand and (c) participation in the Company’s marketing and distribution system. To date, no fees have been received by the Company under the HMA, as the hotel has not yet opened. If the hotel is opened, the Company does not expect that any revenues received pursuant to the HMA would be material to the Company’s consolidated group revenues.
The Company has not invested, does not intend to invest, and will not be required to invest, any of its own capital in connection with the construction or future operation of the hotel, and will not own any interest in the hotel.
Employees
Cecilia D. Blye
September 29, 2009
The Company currently has no employees working in or based in Syria. Certain of the Company’s employees have visited Syria to finalize the terms of the agreements for both hotels and to provide advice under the TSAs.
Ten to twelve months prior to the anticipated opening date of each hotel, the Company intends to recruit and employ a General Manager to run each hotel. Each hotel’s General Manager will be based in Syria. With the exception of the General Manager, all of the employees of the hotels will be employed by the respective owners.
The Company currently has no agents acting on its behalf in Syria.
Other
The Company is currently exploring the possibility of some additional hotel leads in Syria. These discussions are at a very early stage and may or may not lead to the signing of agreements. If agreements are signed, they are likely to have a similar structure to those referred to above, but at this stage it is too early to anticipate the terms of any hotel operations, or even whether or not the transactions will proceed to signing. These discussions do not involve the Syrian government, or Syrian persons designated on U.S. or U.K. sanctions lists.
2.
You state on pages 18-19, 30-32, and elsewhere in the Form 20-F that you operate in the Americas, the Middle East, and Africa, regional references generally understood to encompass Cuba, Iran, and Sudan. We note that the 20-F does not include disclosure regarding any contacts with those countries. Please describe to us the nature and extent of any past, current and anticipated contacts with Cuba, Iran and Sudan, whether through subsidiaries, affiliates, or other direct or indirect arrangements. With respect to any such contacts, provide the same type of information requested in the foregoing comment regarding contacts with Syria.
The Company does not have any past, current or anticipated contacts with Cuba, Iran or Sudan, whether through subsidiaries, affiliates, or other direct or indirect arrangements.
3.
Please discuss the materiality of any contacts with Cuba, Iran, Syria and Sudan, and whether those contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of revenues, assets and liabilities associated with Cuba, Iran, Syria, and Sudan for the last three fiscal years and any subsequent period. Also, address materiality in terms of qualitative
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New
York
Menlo
Park
Washington
DC
London
Paris
Madrid
Tokyo
Beijing
Hong
Kong
Thomas
J. Reid
Davis Polk & Wardwell LLP
450 Lexington
Avenue
New York, NY
10017
212 450 4233
tel
212 701 5233
fax
tom.reid@davispolk.com
September
29, 2009
VIA
EDGAR
United
States Securities and Exchange Commission
Division
of Corporation Finance
100 F
Street, N.E.
Washington,
D.C. 20549
Attn:
Cecilia D. Blye
Re:
InterContinental
Hotels Group PLC
Form
20-F for the Fiscal Year Ended December 31, 2008
Filed
on April 7, 2009
File
No. 1-10409
Dear Ms.
Blye:
On behalf
of our client, InterContinental Hotels Group PLC (the “Company”), we are
submitting this letter in response to the written comments of the staff (the
“Staff”) of the United States Securities and Exchange Commission (the
“Commission”) contained in your letter, dated August 20, 2009 (the “Comment
Letter”), with respect to the above referenced filing on Form 20-F (the
“20-F”).
The
Company’s responses are set forth below, with the headings and numbered items of
this letter corresponding to the headings and numbered items contained in the
Comment Letter. For the convenience of the Staff, the comments from
the Comment Letter are restated in bold italics prior to the Company’s
response.
General
1.
We
note from your website that a new hotel in Syria, InterContinental
Damascus, is scheduled to open in 2012. Syria is identified by the U.S.
Department of State as a state sponsor of terrorism, and is subject to
U.S. economic sanctions and export controls. We note that your Form 20-F
does not include disclosure regarding contacts with Syria. Please describe
to us the nature and extent of your past, current, and anticipated
operations in, or other contacts with, Syria, whether through
subsidiaries, joint ventures, or other direct or indirect arrangements.
Your response should describe any equipment or services you have provided
to Syria, directly or indirectly, and discuss
Cecilia
D. Blye
2
September
29, 2009
whether
you have agents or employees in Syria and any agreements, commercial
arrangements, or other contacts you have had with Syrian government or
entities controlled by that
government.
The
Company is a global hotels group which operates through various
subsidiaries and affiliates in approximately 100 countries and territories
worldwide. Through its subsidiaries and affiliates, it franchises, manages
and owns hotels under seven different brands. The Company does not have
any agreements or commercial arrangements, or other contacts with the
Syrian government, entities controlled by the Syrian government, or Syrian
persons designated on U.S. or United Kingdom (“U.K.”) sanctions
lists.
The
Company’s past, current and anticipated operations in, and other contacts
with, Syria relate principally to two planned hotels, an InterContinental
and a Holiday Inn, both of which are in Damascus, and are described in
detail below. Both hotels will be owned by third-party owners and the
hotel operations will be managed by the Company in return for management
and other fees, as described below. Neither hotel is operational, as both
hotels are at the architectural stage and construction has not yet
commenced. If the hotels are not constructed, the Company will not receive
any management or license fees. In this case, damages may be payable,
depending on the circumstances, but such amounts would be negligible
within the context of the Company’s consolidated group
revenues.
InterContinental
Damascus
In
2007, the Company was approached by a privately-owned general contracting
company that owns a number of hotels in the Middle East, in connection
with the development and operation of a hotel in Damascus, Syria under the
Company’s InterContinental brand. The hotel developer, which will own the
hotel once constructed, is a Syrian company owned by a Kuwaiti
fund.
The
InterContinental Damascus project is at an architectural stage with no
construction having commenced. The Company has been informed by the owner
that it currently anticipates the completion date to be May
2012.
The
Company, through a U.K. subsidiary, entered into a Technical Services
Agreement (“TSA”) with the owner in May 2007 to provide advice and
technical services in connection with the construction of an
InterContinental hotel in Damascus, Syria. The Company, through a U.S.
subsidiary, entered into a Hotel Management Agreement (“HMA”) in April
2008, pursuant to which such subsidiary of the Company or any other
subsidiary of the Company to which the Company would elect to assign the
HMA, would manage the hotel, such HMA to be effective once the hotel
opens.*
TSA
Pursuant
to the terms of the TSA, the Company, through a designated U.K.
subsidiary, is currently providing technical services and advice for the
construction of the hotel. The Company is acting as a consultant to the
owner and provides the owner with the relevant
* This is
a standard method of documenting this type of deal in the hotel
industry.
Cecilia
D. Blye
3
September
29, 2009
brand
standards and hotel technical specifications. Further, the Company reviews
technical drawings and advises the owner on the hotel’s functionalities to
ensure that the hotel will comply with relevant brand standards. The owner is
undertaking the hotel’s construction and no equipment or labor is provided by
the Company for the hotel’s construction.
As
with most arrangements of this nature entered into by the Company,
pursuant to the TSA, the Company is entitled to a technical services fee,
in this case, half of which was paid on signing the TSA, a further 25% of
which is payable when construction commences and the balance of which is
payable on completion. The amount paid upon the signing of the TSA in 2007
(being 50% of the TSA fee) represented substantially less than
0.01% of the Company’s consolidated group revenues for that
year.
HMA
Pursuant
to the terms of the HMA, the Company will, initially through a U.S.
subsidiary, manage the hotel on behalf of the owner. Although not
identified at this stage, it is likely that the Company will decide to
assign the HMA to another subsidiary of the Company. Once the hotel is
opened during the term of the HMA, it may be necessary for the Company,
acting on behalf of the owner through the hotel’s General Manager, to
procure small operating equipment for hotel operations. All operating
equipment required for hotel operations will be locally sourced and paid
for by the owner.
Once
the hotel opens and operations commence, pursuant to the HMA, the Company
will receive: (i) a base management fee, (ii) an incentive fee and (iii)
system assessment fees for: (a) the management of the hotel, (b) the use
of the InterContinental brand and (c) participation in the Company’s
marketing and distribution system. To date, no fees have been received by
the Company under the HMA, as the hotel has not yet opened. If the hotel
is opened, the Company does not expect that any revenues received pursuant
to the HMA would be material to the Company’s consolidated group
revenues.
The
Company has not invested, does not intend to invest, and will not be
required to invest, any of its own capital in connection with the
construction or the future operation of the hotel, and will not own any
interest in the hotel.
Holiday Inn
Damascus
In
2008, the Company was approached by a United Arab Emirates registered
private construction group in connection with the development and
operation of a hotel in Damascus, Syria, under the Company’s Holiday Inn
brand. This construction group is the hotel developer and will own the
hotel once constructed.
The
Holiday Inn Damascus project is at an architectural stage. The Company has
been informed by the owner that it currently anticipates the completion
date to be December 2011. Excavation works have started on the site,
although structural work has not yet commenced. The Company believes
construction may commence before the end of
2009.
The
Company, through the same U.K. subsidiary used for the InterContinental
Damascus hotel, entered into a TSA with the owner in June 2008 to provide
advice and technical
Cecilia
D. Blye
4
September
29, 2009
services
in connection with the construction of the Holiday Inn hotel in Damascus,
Syria. The Company, through a Hong Kong subsidiary, entered into a HMA in
November 2008, pursuant to which such subsidiary of the Company or any
other subsidiary of the Company to which the Company would elect to assign
the HMA, would manage the hotel, such HMA to be effective once the hotel
opens.
TSA
Pursuant
to the terms of the TSA, the Company, through a designated U.K.
subsidiary, is currently providing technical services and advice for the
construction of the hotel. The Company is acting as a consultant to the
owner and provides the owner with the relevant brand standards and hotel
technical specifications. Further, the Company reviews technical drawings
and advises the owner on the hotel’s functionalities to ensure that the
hotel will comply with relevant brand standards. The owner is undertaking
the hotel’s construction and no equipment or labor is provided by the
Company for the hotel’s
construction.
As
with the InterContinental Damascus hotel and, pursuant to the TSA, the
Company is entitled to a technical services fee, half of which was paid on
signing the TSA, a further 25% of which is payable when construction
commences and the balance of which is payable on completion. The amount
paid upon the signing of the TSA in 2008 (being 50% of the TSA fee)
represented substantially less than 0.01% of the Company’s consolidated
group revenues for that year.
HMA
Pursuant
to the terms of the HMA, the Company will, initially through a Hong Kong
subsidiary, manage the hotel on behalf of the owner. Although not
identified at this stage, it is likely that the Company will decide to
assign the HMA to another subsidiary of the Company. Once the hotel is
opened and during the term of the HMA, it may be necessary for the
Company, acting on the behalf of the owner through the hotel’s General
Manager, to procure small operating equipment for hotel operations. All
operating equipment required for hotel operations will be locally sourced
and paid for by the owner.
Once
the hotel opens and operations commence, pursuant to the HMA, the Company
will receive: (i) a base management fee, (ii) an incentive fee and (iii)
system assessment fees for: (a) the management of the hotel, (b) the use
of the Holiday Inn brand and (c) participation in the Company’s marketing
and distribution system. To date, no fees have been received by the
Company under the HMA, as the hotel has not yet opened. If the hotel is
opened, the Company does not expect that any revenues received pursuant to
the HMA would be material to the Company’s consolidated group
revenues.
The
Company has not invested, does not intend to invest, and will not be
required to invest, any of its own capital in connection with the
construction or future operation of the hotel, and will not own any
interest in the hotel.
Employees
Cecilia
D. Blye
5
September
29, 2009
The
Company currently has no employees working in or based in Syria. Certain
of the Company’s employees have visited Syria to finalize the terms of the
agreements for both hotels and to provide advice under the
TSAs.
Ten
to twelve months prior to the anticipated opening date of each hotel, the
Company intends to recruit and employ a General Manager to run each hotel.
Each hotel’s General Manager will be based in Syria. With the exception of
the General Manager, all of the employees of the hotels will be employed
by the respective owners.
The
Company currently has no agents acting on its behalf in
Syria.
Other
The
Company is currently exploring the possibility of some additional hotel
leads in Syria. These discussions are at a very early stage and may or may
not lead to the signing of agreements. If agreements are signed, they are
likely to have a similar structure to those referred to above, but at this
stage it is too early to anticipate the terms of any hotel operations, or
even whether or not the transactions will proceed to signing. These
discussions do not involve the Syrian government, or Syrian persons
designated on U.S. or U.K. sanctions
lists.
2.
You
state on pages 18-19, 30-32, and elsewhere in the Form 20-F that you
operate in the Americas, the Middle East, and Africa, regional references
generally understood to encompass Cuba, Iran, and Sudan. We note that the
20-F does not include disclosure regarding any contacts with those
countries. Please describe to us the nature and extent of any past,
current and anticipated contacts with Cuba, Iran and Sudan, whether
through subsidiaries, affiliates, or other direct or indirect
arrangements. With respect to any such contacts, provide the same type of
information requested in the foregoing comment regarding contacts with
Syria.
The
Company does not have any past, current or anticipated contacts with Cuba,
Iran or Sudan, whether through subsidiaries, affiliates, or other direct
or indirect arrangements.
3.
Please
discuss the materiality of any contacts with Cuba, Iran, Syria and Sudan,
and whether those contacts constitute a material investment risk for your
security holders. You should address materiality in quantitative terms,
including the approximate dollar amounts of revenues, assets and
liabilities associated with Cuba, Iran, Syria, and Sudan for the last
three fiscal years and any subsequent period. Also, address materiality in
terms of qualitative