The budget hotel chain Travelodge, which has suffering a serious debt crisis, has had a major overhaul of its business. This has meant that the chain is now, effectively, owned by its lenders and its financial future is secure. It has agreed to a restructuring plan that will reduce its £635m debt to £329m, and the repayment deadline has been extended to 2017.
An additional £75m is to be injected into the business by investment bank Goldman Sachs, who own the debt, and two hedge funds from the US, which will be used to refund a major refurbishment of the Travelodge properties, which are not owned by the bank. This effectively means that Dubai International Capital, who bought Travelodge in 2006, will lose around £400m due to the debt for equity exchange.
Travelodge have released a statement about this deal, saying that it would be undertaken in conjunction with a CVA, Company Voluntary Arrangement, that has been launched today and will this reduce the rent levels at certain sites. It went on to say that the company had been working with its 3 key investors; Goldman Sachs, Avenue Capital Group and GoldenTree Asset Management to reach an acceptable agreement.
The terms of the proposed CVA state that the company must find operators to take over the 49 of their 500 hotels which are viewed as not being viable. Travelodge have said that they do not anticipate any job losses or closures, and is seeking reductions in the rent at 109 of their sites.
175 of their hotels will benefit from the new refurbishment programme, which the company estimates will cost £55m. Grant Hearn is the CEO of Travelodge, and he has said that the CVA, along with the financial restructuring, will leave the company moving forward in a stronger position and ensure the long term future of the business.