Dubai International Capital has relinquished UK hotel operator Travelodge after a debt restructuring that has seen its lenders win control of the company, according to a statement from the hotel group.
Investment bank Goldman Sachs and New York-based hedge funds Avenue Capital Group and GoldenTree Asset Management have assumed ownership of the company.
The restructuring sees DIC, which acquired the company in 2006 from buyout firm Permira in a £675 million deal underpinned with £478 million in debt, write off its entire equity stake in the business. Travelodge began discussions with lenders late last year after breaching covenants on its debt.
The Goldman, Avenue and GoldenTree trio will inject £75 million (€96 million; $118 million) of new capital into Travelodge as part of the restructuring, £55 million of which will be used to refurbish some of the group’s older hotels.
Avenue and GoldenTree , which have reportedly owned Travelodge debt since 2006, provided a £60 million loan to the business in February which would have ranked ahead of other senior debt in the event of insolvency. Two months later, Travelodge chief executive Guy Parsons left the company, to be replaced by executive chairman Grant Hearn who helped to broker the restructuring process.
The financial restructuring, including the CVA, will leave Travelodge in a much stronger position and will ensure a long-term, sustainable future for the business.
Grant Hearn, Travelodge CEO
As part of the restructuring deal, £233 million of bank debt has been written off, while £71 million has been repaid. The measures mean overall group debt has been reduced from £635 million to £329 million, the statement said. Loan notes of £476 million will be written off completely.
Senior lenders to Travelodge included RBS, Investec, Barclays and Babson Capital Management.
The remaining debt’s maturity has been extended to 2017, while cash pay interest has been reduced to 0.25 percent above LIBOR through to the end of the 2014, the statement said.
Travelodge has entered a compulsory voluntary arrangement (CVA), a UK mechanism which allows a company to restructure its debts, often with a proposal to allow creditors to share in future profits. KPMG is advising the company on its CVA, which is expected to take 17 days to complete.
As part of the deal, Travelodge – which rents rather than owns the premises it operates hotels from – will seek rent reductions for about 109 hotels, with a further 347 hotels remaining untouched. However, it will look to offload 49 hotels to other operators. Until alternative operators can be found, rent on these premises will be reduced by 45 percent, KPMG said in a separate statement. Travelodge said it “envisages no hotel closures or job losses”.
Travelodge chief executive Grant Hearn said in the statement: “The financial restructuring, including the CVA, will leave Travelodge in a much stronger position and will ensure a long-term, sustainable future for the business. 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.”