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Executives

Paul White - President & Chief Executive Officer

Martin O’Grady - Vice President & Chief Financial Officer

Ned Hetherington - Vice President, General Counsel & Secretary

Pippa Isbell - Vice President of Corporate Communications

Analyst

David Katz - Oppenheimer & Co.

Joseph Greff - J.P. Morgan

Steve Kent - Goldman Sachs

Ryan Meleta - Morgan Stanley

Ross Haberman - Haberman Fund

Orient-Express Hotels (OEH) Q2 2009 Earnings Call August 6, 2009 10:00 AM ET

Operator

Welcome to the second quarter earnings conference call for Orient-Express Hotels. My name is Sarah, and I will be your coordinator for today’s conference. For the duration of the call you will be on listen-only. However, at the end of the call, you will have the opportunity to ask questions. (Operator Instructions).

I am now handing the call over to Pippa Isbell to begin today’s conference.

Pippa Isbell

Good morning ladies and gentlemen. As the operator indicated, this is the Second Quarter Earnings Conference Call for Orient-Express Hotels. We issued our news release last night and it’s available on our website at www.orientexpress.com as well as on the SEC website. For anyone who has not yet seen it, the summary is as follows.

Second quarter total revenues excluding real estate of a $132 million, same store RevPAR down 24% in local currency, 33% in US dollars. Adjusted EBITDA before real estate of $26.7 million.

On the call today are James Hurlock, Chairman of Orient Express Hotel, Paul White, President and Chief Executive Officer, Martin O’Grady, Chief Financial Officer, and Ned Hetherington, Company Secretary, to whom I will now hand over for the usual announcements.

Ned Hetherington

Good morning everyone, I would like to deal with our usual house keeping matter before we get started and that is our cautionary statement under the Private Securities Litigation Reform Act of 1995.

In the course of remarks to you today by Orient Express Hotels management and in answering your questions, they may make forward-looking statements concerning Orient Express Hotel, such as its earnings outlook, future investment plan, and other matters that are not historic facts.

We caution that actual results of Orient Express Hotels may differ materially from these forward-looking statements. Information about factors that could cause actual results to differ is set out in today’s news release, the company’s latest annual report to shareholders and the filings of the company with the Securities and Exchange Commission.

That’s all I have, I will now turn the call over to Paul White, CEO of Orient Express Hotels.

Paul White

Thank you Ned, good morning everybody. Well, another challenging quarter for the lodging industry and indeed for Orient Express. Before I get into the substance of today’s call, which comes on the back of a very tough trading period for the industry, a few specific notes on the second quarter results.

I think the press release gives adequate detail on our performance. But there are a few issues, which distorted result, which was in general in line with our internal expectations.

On the operations from three properties had a disproportionate impact on our results. In Mexico the H1N1 outbreak detonated our business, with our properties dropping $2.5 million of revenue and $1.2 million of EBITDA in the period since the announcement was made. In Thailand the domestic unrest have seen the $1 million impact on revenue and a $0.5 million impact on EBITDA. These figures have dropped somewhat with already prudent expectation.

In Russia, where historically we have benefited from Grand Hotel Europe being the key property for Russians, we have been hit by the rapid economic collapse in the country. With the Hotel dropping a $16 million of revenue and nearly $8 million of EBITDA.

The positive on this is that we do expect to see Mexico, and indeed Russia, recover at a better pace than perhaps other properties in the portfolio. Taking these properties out of the equation we see a more realistic RevPAR decline across the group of 18%.

Finally, on quarter two, due to the foreign exchange movement, the key being the Brazilian Real, we took a rather larger than expected differed tax charge in quarter two giving us an accounting tax rate of 131%. I’ll let Martin talk about this a bit more in a moment. So, the big question, how close to the bottom are we? At this point it’s still a tough question to answer. What can we say about Orient-Express?

On the whole 2009 is meeting our expectations with the decline in RevPAR revenue and EBITDA forecast beginning to level off. With this comes the ability to plan more effectively, and I think we are at pivotal point in this cycle. Focus now must switch from short-term management to grasping the medium to long-term challenges.

Our short term challenges remain, but we have firm strategies to deal with them, allowing the team to look towards managing efficiently and effectively as economic conditions recover. It’s time to change the thinking to the future rather than the present.

So, let me reiterate the steps we are taking to ensure we are positioned for this recovery. We have talked continually about the three step approach. Starting with step one reduction of the company’s cost space. Moving on to step two, deleveraging, reducing debt by selling non-core asset and the sale of our developed real estate, which I will talk about in more detail on the call.

Allowing us to plan step three, which is to focus our energy on growth of RevPAR and EBITDA as economic conditions turn. This will be a key area of focus over the coming months in the lead up to our third quarter call in November after our traditional high season. So first on operation, like many of our peers cost control, cost reduction have been a key component of navigating this economic downturn. At Orient Express this process started in earnest one year ago.

In the last three quarters we have achieved the targeted $20 million of annual fixed cost reduction. Variable cost reductions including those for shortening seasonal hotel openings reducing tricks on day train and indeed the Venice Simplon-Orient-Express itself supported by strict variable cost management on property resulted in approximate $120 million drop in revenue converting to a $50 million drop in EBITDA pre-estate.

Going forward diligence on cost will remain. However, the fixed cost savings will begin to disappear from the comparative data or that benefit can only be reaped once. The key to the future quite clearly lies in our ability to manage revenue. So what trends are we seeing revenue wise?

Quarter two RevPAR same store local currency was off 24%. Interestingly, only one year ago we were still showing 10% growth. So, how we do get to this number? Reduced occupancy accounts for about two-thirds of the RevPAR drop. In the 90s recession the drop was all occupancy, and even as recently as post 9/11, Orient-Express took the hit just in occupancy.

Bookings on very last minute as even groups have made the decisions at very short notice. At 31st of March, our quarter two bookings was 31% off compared to the same period in the previous year. This reduced to 21% by the end of May, and we closed the quarter 18% down.

A specific example of one hotel, two months out going into July, they have 49% on the books, a year-ago 73%. 21 days out, that was 76%. But this hotel had 91% before. But 7 days out, it was 93% versus 97%. This is the Splendido in Portofino, one of our properties that is continuing to do very well. But it’s interesting to see that even at a property like this, the bookings are really coming in last minute. So what about quarter three, today we sit 25% off as a group. One month ago, this was 29%. The trend seems to be very consistent.

Back to the second quarter, average rate on a same-store basis was down 8% in local currency. Interestingly, we were able to grow rate in certain areas i.e. the rest of the world, but rate contracted more significantly in Europe. This evidences the increased flexibility companies have today by our electronic distribution allowing a much more proactive approach to revenue management.

As I said before, quarter three is traditionally our strongest quarter. It is the high season in Europe. Our July results have seen RevPAR drop by 18%, again consistent with our expectations. Results across the portfolio are varied. What we are seeing is that long haul and domestic markets are outperforming short-hold destination.

In addition, the UK traveler, which is about 20% of our business, is finding life tougher the most. Combination of a weak Pound versus the Euro on top of the strong UK recession is hitting properties like La Residencia in Mallorca, Reid’s in Madeira, and similarly in the US, La Samanna is being hit.

Contrast this with properties like La Manoir or our UK day trains or our two properties on the outskirts of Washington or indeed Australia, where the staycation concept is benefiting them. With traditional long-haul destinations, Italy, South East Asia, South Africa, are doing better than the likes of Charleston and New Orleans relying very much on the US groups market.

Very mix results, I prefer to say reaped the benefits of a balanced portfolio. Cutting through these booking data I have to say again, the picture is varied. Italy is only 6% down, but overall Europe is 22% down, the Russian effect here. In the US we are sitting about 25% down, but more than half of these bookings of the Charleston Place, which is 28% down.

So moving on to step two in the balance sheet. Martin will comment on here in more detail, but the key to achieving our debt target we have stated that we want to achieve a debt to EBITDA ratio of 4 to 5 times by 2011 in the sale of the non-core assets.

In the quarter we successfully sold the Lapa Palace at a good multiple not just of current EBITDA but a peak EBITDA for the property. This sale is evidence that the premium price is a good asset attracting Euro continue to be sustainable even during the toughest of market conditions.

We are progressing well with the sale of the Windsor Court in New Orleans with an SPA agreed, a non-refundable deposit banked and closing set for the end of September. We have run a formal sale process now for Bora Bora lagoon resort and received a number of offers, which we are currently evaluating.

On the real estate front, back in January we announced that Orient Express brought in Phillip Jeshui to the team to head up our real estate division. Phil’s first priority was to ensure that we completed our developments in St. Martin on time and on budget, and I am happy to report the developments remain on schedule to be completed this year.

Sales of the condominiums you remember we sold 22 units in the ’08-09 season, will be stepped up from October 2009 when potential customers return to the island. We have a further 95 of the 181 units to sell and are conservatively planning to sell these out over the next three years.

Sales action for the La Samanna villas and our 40 unsold plots at Casvicol will be ramped as and when we see markets for such products begin to turn. Interestingly in July we did sell two villas at Napasai in Thailand for $1.7 million.

We have a solid plan and I think we are demonstrating that we can execute on this plan. The importance, however, lies in our ability to be patient and execute each element as and when conditions allow.

So, finally, on to step three and looking towards recovery. As I said we’ll talk in much more detail after this third quarter when we have been through the European high season, but the key component of our ability to be ahead of the curve coming out of the trough lies in our brand.

July is a very important month for Orient-Express. Last week the senior management team and our regional management directors from across the globe were locked away in a darkened room ,quite literally a darkened room, for what we call our annual strategy meeting.

One year ago, you can imagine, the topic was cost-cost-cost, how do we cut the cost, where are we going in terms of RevPar . I am fortunate this company have a strong culture here.

Last week it was all about positioning for recovery, no talk of growth or green shoots but ensuring as in par cycles we keep ahead of the curve. Overlaying the stronger emphasis of the brand on top of excellence in product and service at what will remain truly iconic and individual properties is already positioning Orient Express for recovery. Martin?

Martin O’Grady

Thank you Paul. Good morning everyone. At the end of the quarter the company had $144 million of unrestricted cash plus an additional $57 million of funds available on the working capital and revolving credit facilities. Restricted cash was $13 million. The outstanding loans on the Windsor Court Hotel was $37 million, it was $47 million at the year end, but $10 million was repaid in June.

This asset and its related liabilities are now included on the balance sheets under discontinued operations. The proceeds from the sale of the asset will be more than sufficient to repay this outstanding debt. Excluding the Windsor Court Debt, total term debt and capital lease on 30th of June was $809 million.

Taking into account the outstanding working capital facility is a $32 million and a cash balance of $157 million, the net debt at the end of the quarter was $684 million. This compares to $835 million at the start of the year, on trading 12 month basis the ratio of net debt to EBITDA pre-real estate was seven times.

The current portion of term debt at the end of the quarter was $173 million, this included a $112 million of loans drawn under revolver facilities, the road on a six month basis and expire in 2011 and 2012.

The current portion of debt also include $16 million relating to the Australian properties, this debt in local currency AD$20 million was refinanced in July when we secured a three year loan from a new lender at a margin of 250 basis points over the Australian reference rates.

Taking account of the Australian refinancing, the revolvers and excluding the Windsor Court loan our debt maturity schedule is now as follows. The balance of 2009, $21 million; 2010 now $39 million; 2011, $533 million; 2012, $137 million, and after 2012, $79 million. At the end of June, approximately 54% of the debt was fixed, and average cost of debt including margin was 3.8%.

Cash flow for the quarter, net cash flow from operations is $23 million, there was $15 million of CapEx including $3 million of maintenance CapEx and $12 million to complete projects. At the Grand Hotel Europe and Hotel Cipriani, Copacabana Palace and the villas Jimbaran Puri Bali. Investments in Porto Cupecoy during the quarter was $11 million and $3 million was invested in the Hotel das Cataratas refurbishment.

The sale of Lapa Palace generated cash proceeds of EUR19 million in the quarter, a further deferred and unconditional consideration of a EUR11 million will be received in 2010. Net cash provided by financing activities in the quarter was $84 million, including a $141 million from the ex-issue and net debt repayment of $57 million. Overall, there was a net increase in cash of $103 million.

The tax charged in the quarter was $11 million. This includes a current tax charge of $5 million deferred tax charges of $10 million and a thin credit of $5 million. Deferred tax includes $3 million arising from the impact of currency fluctuations on existing deferred tax liabilities. Overall, for the full year, we are expecting a tax charge in order of $14 to $16 million.

I will now pass it back to Pippa.

Pippa Isbell

Thank you very much Martin. I will now hand you back to the operator, so that we can take your question. In the interest of time, could we ask you please to limit yourself to three questions each. Operator.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of David Katz from Oppenheimer. Please go ahead with your question.

David Katz - Oppenheimer & Co.

Hi, good morning. I certainly want to abide by Pippa’s rules, but I missed a couple of the details that Martin was going through, in terms of the capital spending in the quarter. Would you mind just reviewing those and then I do have actually sort of a real question.

Paul White

Okay. I’ll just repeat that paragraph. There was net cash flow from operations was $23 million. There was $15 million of CapEx, including $3 million of maintenance CapEx and $12 million to complete projects at Grand Hotel Europe, Hotel Cipriani, Copacabana Palace, and the villas at Jimbaran Puri Bali. Investment in Porto Cupecoy of the quarter was $11 million and $3 million was invested in the Hotel das Cataratas refurbishment.

David Katz - Oppenheimer & Co.

So the $11 million and the $3 million was on top of the $15 million spending, right? I mean the $11 million and $3 million were sort of real estate CapEx separate from sort of other items.

Paul White

Yes. One important distinction is that the investment in Cupecoy and Hotel das Cataratas were fully financed.

David Katz - Oppenheimer & Co.

Right, okay. So my real question is, just as we take a little longer term view on this, what kind of a, sort of forward booking window do you have, and what we’ve been hearing from many other companies is kind of a compressed booking window, and what kind of sort of cancellation and/or attrition of any kind have you been able to track and what are the trends there?

Paul White

Well, Martin has a whole host of statistics in front of him; I’ll let him read a few of them out. But the key thing is this sort of, the further ahead you look, the worst the picture looks. But when you start looking one week, two weeks out, obviously we are where we are, we are still down. I think everybody in the industry is down at the moment, but the further you look, the more scary it looks.

When you come to one week out, two weeks out, those numbers really start to compress and indeed in the Italian properties for example, properties like La Residencia in Mallorca, we’ve been taking as much as 30% of our revenue in the month that we are in. So for example, I think in July at the Cipriani we booked 30% of the revenue for July in the month of July.

Now two years ago that would have been unheard of, because the Cipriani would have been full for July. So it’s just this sort of, this really late trend. So trying to get meaningful data out of just looking at confirmed reservations on the books is very difficult. You’ve got to start really analyzing the trend analysis.

Martin O’Grady

The data I was showing Paul earlier I thought was very interesting, which was the number of rooms sold in the month of July, that were actually booked in the month of July, the pick up if you like in the month. The Cipriani a year ago, this second quarter in July of 2008, 4% of the room sold in July were actually booked in the month of July. This year it was 30%.

Another interesting one, La Residencia; last year only 14% were booked in July, and this year in July 50% was sold, were booked in the month of July, and we see this trend particularly at the hotels which track more affluent customers if you like. Splendido is another one, the 4% last year and 12% this year is quite a big swing.

Paul White

Okay, does that sort of answer that one David?

David Katz - Oppenheimer & Co.

Yes, very helpful, thank you very much, and I’ll come back around with more.

Paul White

All right thanks.

Operator

We have a question form the line of Joseph Greff with J.P. Morgan. Please go ahead with your question.

Joseph Greff - J.P. Morgan

Good morning or good afternoon guys.

Paul White

Hi Jeff.

Joseph Greff - J.P. Morgan

If we were to go back and look at your US or European business in prior periods, what percentage of volume or revenue is related to finance or Wall Street, and I guess my follow up question to that is, where is that tracking now?

Martin O’Grady

Well, I really couldn’t answer that. I mean, because of the nature of our assets, we have not been in the sort of, we are not bling properties if you like; we are not the favorite, no [Inaudible] to investment bankers, but we’ve not been feeding off of that sort of market, we feed off the more traditional market.

Obviously in New York itself, 21 Club, has been hit by Wall Street, just as many other sort of top restaurants have. I think that there might be a couple of properties. I mean La Residencia out of the UK might be one, but it would be very hard for me to actually sort of say well what comes out of London City/New York City for our properties.

Joseph Greff - J.P. Morgan

Okay, and then a follow up; you mentioned in 2Q, Mexico was impacted by swine flu and then Grand Hotel Europe impacted by economic factors, any sense of improvement here in the 3Q or any sort of forward-looking trends in the 4Q, indicating that things are getting better picking up there?

Martin O’Grady

Yes, I mean I think first of all Mexico. I think the general feeling on Mexico certainly coming out of our sort of marketing guys, is that Mexico is a strong investor in tourism and it is really getting it’s act together to make sure that when we come to the next high season, which will be the end of the year, that there is good access, like there’s been before and the products get support, and we get a lot of support there from the whole Mexican tourist machine.

When it comes to Russia, I mean it is a huge sort of bust/boon sort of story there. What we are seeing is sort of the reservations from the domestic traveler starting to come back a little bit. I think it’s a tough place to do business at the moment, but we will benefit in the long term by being the favored property of the Russian traveler, and it will come back quicker than properties that are reliant on international travelers going to Russia, because the international investors have been spooked by Russia, whereas the Russians themselves are actually becoming stronger believers in their country, because this time around actually, they haven’t just had everything taken away from them.

Joseph Greff - J.P. Morgan

Helpful. Then if I can ask Martin a couple of modeling questions here: tax rate in the third quarter and the fourth quarter, do you have a sense of how we should be thinking about modeling purposes.

Martin O’Grady

As I said, I think overall the full year charge will be coming out between $14 million and $16 million, so I would suggest you spread the full year, less the first six months over the remaining two quarters.

Joseph Greff - J.P. Morgan

Equally spread of between 3Q and 4Q?

Martin O’Grady

More or less.

Operator

(Operator Instructions) We have a follow-up question from the line of David Katz from Oppenheimer. Please go ahead with your question.

David Katz - Oppenheimer & Co.

Hi again. It has been a while since we’ve raised the issue or anyone’s talked about the issue, but there was at one time some legal action challenging some of your corporate structure. Is that dead or alive at this point? Is there any updates that’s worth having?

Martin O’Grady

Ned, do you want to comment quickly on that?

Ned Hetherington

The proceedings in Bermuda are still going on, and we’ll have a short update in our 10-Q when it’s filed in the second quarter on that case, but otherwise we have no comments.

Operator

Our next question comes from the line of Steve Kent Goldman Sachs. Please go ahead with your question.

Steve Kent - Goldman Sachs

Hi good morning. Three questions; first, you mentioned now a couple of times on the last minute bookings, maybe it’s obvious, but it wasn’t me, are these last minute bookings coming in at much lower prices or what exactly are you seeing on these trends as they come in?

Second, on debt covenants; I’m not sure that you addressed it exactly where you are on some of your debt covenants and maybe if you could just explain that a little bit more as you look out?

Then third; I have to tell you Paul, I was completely confused by the long haul, domestic, short haul thing. Maybe I don’t know what country we are talking about, but maybe you could explain that a little bit.

Paul White

Yes, no problem. Let me take one and three and then I’ll let Martin talk about the debt covenants. I mean I do think that on the last minute, obviously we are being more flexible all right. It is something that in previous sort of cycles we have not been able to, but the volume of business has now come through Rnexpress.com for example, which I think is sort of 13% plus. It means that even for products like the Splendido and the Cipriani, we can be putting offers out right up to the last minute to fill these properties.

The long haul, short haul issue is one that, if we look at it in two sets, let’s look at what is long haul, short haul in Europe. I mean proxies like La Residencia and Reid are very popular for the UK market. I think both have over 40% UK clientele. They are short rate business, rather than your sort of long big annual vacation business.

Whereas Italy in the high season is a lot of the long haul travelers from the United States. The long haul traveler is still traveling. The once a year big holiday, we are observing it’s still happening. It’s the old “Let’s go away for a weekend to Portofino,” that is not happening.

So, the equivalent in the US, what I was trying to demonstrate is that, Americans are still coming to Europe or going to South America, but a long weekend in the Caribbean, although generally the Caribbean is dollar currency, obviously we’ve got a Euro impact as well there in La Samanna, but that is what people seems to be giving up on. They are not giving up on the big holiday, they are giving up on the sort of short trips.

Steve Kent - Goldman Sachs

Hey Paul just for a moment. So just to be clear though, because then I heard the other part, which is, so it sounds like what you’re saying is long hauls are still happening. The day trips are somewhat still happening, but sort of the in-betweeners are not happening or that’s where you are seeing the greatest…

Paul White

Exactly right. So, if you sort of really drill down property by property, in Europe the two guys that are really sort of suffering are La Residencia in Mallorca and Reid’s in Madeira, which is a sort of a two to three day stay, and Hotel de la Cite as well. Whereas the ones with the longer length of stay, and the business that goes to those properties which is the sort of six seven nights, is holding up better.

Martin O’Grady

On the covenant Steve, we had as you know two covenant breaches that we did get waivers for, those were formally agreed and put to bed. We do have a very tight headroom on some of the covenants, but we have been managing to get through it. I think we are at the bottom right now, and I think we will get through it.

We do stay very close to the banks. We’ve given them lots of information; we’ve made numerous presentations to our clubs of banks. I’d say, we are lucky that we don’t have CNBS debt. If we were a hotel owner with lots of CNBS debt, we’d probably be very nervous, but we only have one hotel with CNBS debt, and that’s Charleston, which has got a very high level of headroom.

There is only one piece of debt in our portfolio which has what I would describe as toxic debt and by that I mean, a very high loan to value, and that’s one of the core, but of course that’s being sold now, and the debt will be fully discharged, and the bank is very happy.

An example where the bank is; if you look across the rest of the portfolio, we have got ample headroom in terms of loan to value in all of the hotels, and a good example is the Reid’s, and as we disclosed and told you, we have got a technical breach, but we’ve given lots of information to the bank and they are very happy with the performance of the hotel we continue to service all of the debt, and there’s lots of headroom on the asset. So, it’s still concerning, but we are getting through it.

Paul White

Just to add to that Steve, I mean all of the covenant calculations are based on a trailing 12 month basis and now we are starting to get the benefit of a full year, of much lower interest rates. Fortunately the rate at which interest rates and the interest cost is gone down, is much quicker than the rate at which EBITDA or net cash flow has going down.

Steve Kent - Goldman Sachs

Okay, thank you.

Operator

Our next question comes from the line of Ryan Meleta from Morgan Stanley. Please go ahead.

Ryan Meleta - Morgan Stanley

Good morning guys.

Paul White

Good morning.

Ryan Meleta - Morgan Stanley

I just want to thank you; you gave some great commentary on how the booking trends are kind of shortening in this environment. I was wondering if you could couple that commentary with how the rate trends are looking, and talk about how the ones you mentioned, you got it close to 93% booking pace as things got closer in. How did rate move as you got closer in as well? Did rate deteriorate to a large degree or are you able to hold rate at the longer or shorter end; and how is that looking going forward?

Paul White

Actually, the interesting thing is the rate of that particular property went from EUR 1162, down this year to EUR 1108, so yes it did come down a little bit. But what we seem to be seeing consistently is, we think we are being very flexible on rate, but what is coming through in the results almost across the Board, is that the RevPAR drop is about one-third rate related, ADR related two-thirds occupancy.

Again, we are much more flexible. If you go on to the website and you just try and book a room at a hotel, you’ll see that entry level rooms in the shoulder seasons, we are hugely flexible on. Whereas high season, junior suites, suites,we are able to be less flexible.

Indeed last week we were sort of talking about rate structures for the next year, next high season in Europe and going further out, high season in southern hemisphere, November through February of the following year. I think the suite and junior suite level at the top end, we will actually be able to move rates upwards a little bit.

Ryan Meleta - Morgan Stanley

Wonderful, that’s helpful. Thanks a lot.

Operator

(Operator Instructions). We have a question from the line of Ross Haberman from Haberman Fund. Please go ahead with your question.

Ross Haberman - Haberman Fund

Good morning gentlemen, how are you?

Paul White

Yes, well thank you. How are you Ross?

Ross Haberman - Haberman Fund

A quick question on Windsor Court, that is up for sale, which other properties which you’ve announced are of up for sale?

Paul White

Say that again, sorry; which other properties are for sale as well did you say?

Ross Haberman - Haberman Fund

Correct, yes.

Paul White

We are not going public on all of them, but what we have done is, we have identified about eight properties for one reason or another, some is because of the destination, some is because of scale, well, but we will be looking at over the next two to two and a half years.

At the moment we are focused on Windsor Court, which as we say will close at the end of September, and Bora Bora Lagoon resort. As markets move in the areas where we’ve identified the other properties, we will address them as we go along, but I think that it’s safe to say that our target is by the end of 2011, probably the existing portfolio will be seven or eight properties lighter than it is at the moment.

Ross Haberman - Haberman Fund

Just one specific question, where do you stand with the library back at the 21 clubs, what’s the status of that today?

Paul White

Yes, good point actually, I should have mentioned that in my commentary. Basically we’ve pushed back the whole deal by 24 months, and we paid an extra $9 million of deposits to the library.

The project itself is very much sort of on hold, but we are going through a reevaluation process at the moment of exactly what we can do on the site. So, when the time is right, we will start talking to potential partners or even maybe take the opportunity to sell the whole projects and just retain the management contract.

The important thing that investors should focus on, is we have reduced significantly our liability, should we end up having to just walk away from this project.

Ross Haberman - Haberman Fund

Okay, thank you guys. Best of luck.

Operator

We have a question from the line of David Katz from Oppenheimer. Please go ahead.

David Katz - Oppenheimer & Co.

HI again. Have you told us what the Windsor Court is going to be sold for? Do we know what that price is?

Paul White

No, we haven’t told you David. At this stage, as much as I’d like to tell you, it’s confidential between us and the buyer.

David Katz - Oppenheimer & Co.

Okay. Then I can I just follow it up quickly in just what we’ve seen this week from many of the asset owing companies are situations where assets are being conveyed rather than sold in the open market and conveyed back to the lender. What is your strategy with that sort of thing? I mean would you sooner perhaps sell something for less than the mortgages?

Paul White

No, we don’t have any assets in that category David.

David Katz - Oppenheimer & Co.

Okay. Would you consider selling them for less than the mortgage or conveying them or anything like that?

Paul White

As Martin said, The Windsor Court actually is the only asset that actually that had a high LTV based on current day, but as you know we run a process through CB Richard Ellis and the property was marketed, and the buyer I think is a very good buyer, but all that will become public I think at the end of September.

David Katz - Oppenheimer & Co.

Got it. Okay, thank you very much.

Operator

That concludes our calls for today ladies and gentlemen. Thank you very much for your time.

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Source: Orient-Express Hotels Q2 2009 Earnings Call Transcript
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