Travelodge considering debt plan

TravelodgeOne of Britain's biggest budget hotel operators is considering walking away from up to 50 of its sites to help tackle its £500 million debt mountain.

Travelodge, which owns more than 500 hotels across the UK, Ireland and Spain and employs more than 6,000 staff, is considering asking landlords to accept a controversial company voluntary arrangement (CVA) as part of a wider restructuring.
The deal would effectively see Travelodge demand to end some of its uneconomical leases or renegotiate its debt to help it stave off administration.

The Times reported no jobs are believed to be at risk because the hotels involved would likely be transferred to new operators over the next year.
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If accepted by landlords, the deal would form part of a wider financial restructuring that is expected to result in American hedge funds Avenue Capital and GoldenTree Asset Management joining US bank Goldman Sachs to take over ownership from Dubai International Capital.

Travelodge is thought to be trading well but is struggling to deal with £500 million of debts, accrued during a buyout spree before the financial crisis set in. Travelodge, the UK's second biggest budget hotel chain behind Whitbread's Premier Inn, reported a 20% increase in profits last year to £55 million.

The two hedge funds, which specialise in taking over struggling businesses by taking ownership in return for writing off debts, are understood to have provided an emergency £60 million lifeline to the firm ahead of an expected debt-for-equity swap.

A spokesman for Travelodge said: "As part of the ongoing restructuring process, a number of options are being considered. However, no decisions have been taken at this stage and we will update you in due course."

It is understood that accountancy firm KPMG has been appointed to steer the company through its restructuring process although a CVA is just one of the options under consideration.

Earlier this year, KPMG led a CVA of gym chain Fitness First, which allowed it to transfer 67 of its 147 gyms to other operators over the next six months.

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