Britain’s biggest budget hotel operators Travelodge has decided to disown 49 of its hotels and write off £700 million of its debts under a controversial rescue deal.
Travelodge, which owns more than 500 hotels across the UK, Ireland and Spain, defended the deals saying that the deals help the company secure its long-term future and relieve its crippling debt burden.
The hotel management company wants the landlords of 49 hotels to cut rents by 45% over the next six months while it seeks new operators and is asking for a 25% rent cut for a further 109 sites it wants to keep.
Travelodge said there were no current plans to close hotels or make job losses. Under the financial restructuring plan, the company has disclosed that £235 million of bank debt will be written off and £71 million will be repaid, limiting its debt to £329 million, while a further £476 million of loan notes will also be done with.
The ownership and control of the hotel operator is being transferred to three main lenders – Goldman Sachs and two American hedge funds Avenue Capital and GoldenTree Asset Management from Dubai International Capital, which bought the chain in 2006 in a debt-fuelled deal.
The plans will also see £75 million of new cash injected into the company, with £55 million being spent on refurbishing 175 of Travelodge’s hotels starting early next year.
Travelodge chief executive Grant Hearn said, “This is a successful brand with millions of customers and the company will emerge in excellent shape from this process.” But for the rescue deal to go through, will need the support of 75% of creditors at a vote on September 4.