UK budget hotel company Travelodge is planning to close 49 properties as part of a financial restructuring which will also see the group invest £55 million into refurbishing 175 hotels.
The restructure, which is part of a drive to secure the long-term future of the business, will be undertaken in conjunction with a Company Voluntary Arrangement (CVA), which 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 includes £75 million of new money being injected into the company, with £55 million being invested into a major refurbishment programme across the estate covering over 11,000 rooms and 175 hotels.
Bank debt of £235m will be written off and £71m repaid, reducing total bank debt from £635m to £329m.
“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.” explains Grant Hearn, CEO.
“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.”
The refurbishment programme will commence in early 2013 and continue through to summer 2014.
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.