August 2012 - Travelodge (The
Company), the UK’s leading budget hotel company, is pleased to announce
that it
has agreed a financial restructuring, which will secure the long-term
future of
the business. This 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.”
About Travelodge
The first budget hotel brand to launch in the UK in 1985, Over 13
million
people stayed with Travelodge last year and 90% of reservations are
currently
made online at www.travelodge.co.uk, where room rates start at
£19 per night.
About Golden Tree Asset
Management
GoldenTree Asset Management is one of the largest independent asset
managers
focused on corporate credit. GoldenTree manages approximately $16
billion of
assets in a variety of absolute return and long only strategies. The
firm
operates out of offices in New York and London and invests primarily in
corporate credit markets across a broad range debt instruments such as
leveraged loans, high yield bonds, structured credit, and distressed
debt.
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