KPMG in Manchester have been appointed to administrate the arrangement."The impact of the economic downturn on Travelodge's business has been compounded by a large debt burden and expensive lease arrangements," said KPMG's Richard Fleming who is overseeing talks with landlords.
The new owners are putting in £75 million of new cash whilst £235 million of debt is being written off and £71 million repaid, bringing its borrowings down to £329 million, from the £1.1 billion they had reached. DIC had financed its £675 million takeover of the company six years ago by issuing a £480 million bond which is also being written off to its cost.
As part of the plan the new owners are looking to cut 49 hotels out of the portfolio the rent, while reducing the rents by 25% on a further 109 of the 500+ portfolio which would be viable at a lower rent. A total of 347 hotels, two offices and four restaurants will be retained at current rents and current payment terms throughout the CVA period. Last year Travelodge produced £55 million of profit on revenues up 16% at £370 million, but it was not enough. Next month 75% ofthe landlords affected must vote in favour of the proposals at the creditors meeting. The pill is sweetened by a clawback deal which will give landlords a share in the new business's profits.
Travelodge chief executive Grant Hearn said the company was already looking for new operators for the 49 hotels it does not want and "currently envisages no hotel closures or job losses". "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," said Hearn. "This is a successful brand with millions of customers and the company will emerge in excellent shape from this process."