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Travelodge to Restructure and Sell 49 Hotels

Travelodge to Restructure and Sell 49 Hotels

UK budget hotel company Travelodge has agreed a financial restructuring, to be undertaken in conjunction with a Company Voluntary Arrangement agreed with investors GoldenTree Asset Management, Avenue Capital Group and Goldman Sachs, and will dispose of 49 of its 505 hotels.

Travelodge Logo

The key terms of the financial restructuring are:

• At least £75 million of new money to be injected into the company

• £55 million will be invested into a major refurbishment programme across the estate covering over 11,000 rooms and 175 hotels. The refurbishment programme will commence in early 2013 and continue through to summer 2014

• Bank debt of £235 million will be written off and £71 million repaid, reducing total bank debt from £635 million to £329 million.

• Repayment date of the remaining debt extended to 2017 and cash pay interest reduced significantly to a rate of 0.25% above LIBOR through to the end of 2014

Other than certain landlords, the CVA will not impact on any other party associated with Travelodge. There will be no impact on the operational running of the business, all of Travelodge’s hotels will continue to operate normally, all suppliers will continue to be paid as normal, and customers will experience no changes to bookings.

Under the terms of the proposed CVA:

• The majority of hotels (347 hotels and 70% of the estate) will be untouched and 109 hotels (22% of the estate) will remain part of the business but will be subject to a rent reduction following completion of the CVA

• It is no longer viable to operate 49 hotels (8% of the estate) and Travelodge will work with the landlords to identify new operators for these hotels and currently envisages no hotel closures or job losses.

Grant Hearn, Chief Executive, said: 

“The financial restructuring, including the CVA, will leave Travelodge in a much stronger position and will ensure a long-term, sustainable future for the business. Once this joint process is completed, Travelodge’s debt, interest costs and lease liabilities will be significantly reduced. This new appropriate level will provide greater security for our staff, suppliers, landlords and developers. This is a successful brand with millions of customers and the company will emerge in excellent shape from this process.”

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NEIL STEEDMAN has been a trade journalist, copywriter, editor and proofreader for 50 years, and News & Features Editor for ‘Irish Travel Trade News’ for the past 40 years.

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