Travelodge restructures its debt
The deal however hands control to lenders
By CFOWorld staff | CFO UK | Published 15:59, 17 August 12
Travelodge came to an agreement to restructure its debt on Friday but the deal hands lenders majority control of the budget hotel chain.
The restructuring deal however means a significant loss for Dubai owners who bought the chain in 2006
Under the restructuring deal, debt will be reduced to £329 million from £635 million and new cash totalling £75 million will be injected into the business for major refurbishment work, the company said on Friday.
Travelodge owner Dubai International Capital - which had already written down its investment in Travelodge - will hand the keys to mezzanine lenders including GoldenTree Asset Management and Avenue Capital Group.
Travelodge fell victim to the economic downturn, coupled with a large debt burden and expensive lease arrangements. Its adviser KPMG said all existing hotels would remain open though 49 would be sold to other operators.
DIC bought Travelodge, whose promotions include rooms for 10 pounds a night, from private equity firm Permira in 2006 for 675 million pounds, backed by loans of £478 million.
Under the restructuring, the repayment date for the remaining £329 million of debt is extended to 2017 and interest payments are reduced to 0.25 percent over Libor until 2014, to alleviate the burden while the hotelier's properties undergo refurbishment.
Some £55 million will be invested to renovate more than 11,000 rooms and 175 hotels, starting in early 2013 through to summer 2014, the company said.
The group will undergo a company voluntary at the High Court in London to complete the restructuring.
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