Travelodge Hotels Ltd., Thame, England, agreed to a financial restructuring deal on Friday that will see £235 million (US$367 million) in debt written off and cease operating 49 hotels.
Travelodge’s parent company Dubai International Capital negotiated the deal with New York City-based hedge funds Avenue Capital Group and GoldenTree Asset Management as well as investment bank Goldman Sachs.
The terms of the restructuring are:
- At least £75 million (US$118 million) of new money to be injected into Travelodge
- £55 million (US$86 million) will be invested into a major refurbishment program across the estate covering over 11,000 rooms and 175 hotels and the refurbishment program will commence in early 2013 and continue through to summer 2014
- Bank debt of £235 million (US$369 million) will be written off and £71 million (US$111 million) repaid, reducing total bank debt from £635 million (US$999 million) to £329 million (US$517 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
- The majority of Travelodge’s portfolio, 347 hotels, will continue to operate under current arrangements and 109 hotels, 22% of the portfolio, will remain part of the business going forward but will be subject to a rent reduction following completion of the company voluntary agreement
- Travelodge will no longer operate 49 hotels, 8% of its portfolio, and Travelodge will work closely with the landlords to identify new operators for these hotels and currently envisages no hotel closures or job losses
Dubai International Capital bought the British budget hotel company, known for its £10 (US$15.90) per night guestrooms, for US$1.3 billion in 2006 with credit from two hedge funds. Travelodge replaced its CEO in April.