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Dubai International Capital bought the British budget hotel company, known for its £10 (US$15.80) per night guestrooms, for US$1.3 billion in 2006 with credit from hedge funds Avenue Capital Group and GoldenTree Asset Management, both based in New York City.
Both of the hedge funds have pledged £60 million (US$95 million) in loans for Travelodge, and Dubai International Capital could stand to lose up to £400 million (US$634 million) from the debt-for-equity deal because of the amount of debt it took on to purchase Travelodge, The Guardian reported on Sunday. Travelodge could face bankruptcy within six weeks without a large cash infusion.
Travelodge operates 470 hotels primarily in the U.K. with nine in Ireland and four in Spain.
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