The U.K.-based budget hotel company will shed 49 properties as its ownership transfers from Dubai International Capital to a trio of key U.S.-based investors.
Travelodge has agreed a financial restructuring that will be undertaken in conjunction with a Company Voluntary Arrangement (CVA), which was launched today and will reduce levels of rent at certain sites.
Travelodge has worked hard alongside its three key investors, GoldenTree Asset Management, Avenue Capital Group and Goldman Sachs, to reach agreement on its financial restructuring and believes that it provides further stability to the business and demonstrates confidence in the Company.
The key terms of the financial restructuring are as follows:
- At least £75m of new money to be injected into the Company
- £55m 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 £235m will be written off and £71m repaid, reducing total bank debt from £635m to £329m.
- 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
In connection with the financial restructuring, Travelodge has initiated a CVA.
KPMG is supervising the CVA process and will be leading discussions with the landlords. The CVA is expected to take approximately 17 days to complete.
Other than certain landlords, the CVA will not impact 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 vast 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 going forward but will be subject to a rent reduction following completion of the CVA
- Unfortunately, following a full assessment, Travelodge has found that it is no longer viable to operate 49 hotels (8% of the estate). The Company will work closely with the landlords to identify new operators for these hotels and currently envisages no hotel closures or job losses.
Commenting on today’s announcement, Grant Hearn, CEO, said:
“The financial restructuring, including the CVA, will leave Travelodge in a much stronger position going forward 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.”
A spokesperson from GoldenTree Asset Management, said:
“We are pleased to have agreed upon a financial restructuring for this business. Travelodge is an excellent company with great management and employees, and this action will secure the future of the Company for the long-term.”
A spokesperson from Avenue Capital Group, added:
“We believe that this financial restructuring, along with the CVA process, will enable Travelodge to emerge as a stronger business and to take advantage of the great opportunities available to it as the UK's leading budget hotel operator.”