Travelodge Hotels is considering a company voluntary agreement (CVA) in an attempt to deal with its £500 million debt burden.
The company has confirmed it was seeking a company voluntary arrangement with landlords, ending up to 50 loss-making hotel leases, for which the hotel chain would need to convince landlords to find new operators.The proposed company voluntary agreement is part of a larger financial restructuring that Dubai International Capital, owners of Travelodge, is negotiating with hedge funds Avenue Capital Group and GoldenTree Asset Management as well as investment bank Goldman Sachs, in order to retructuring its £500 million debt.Other options being considered include an injection of fresh equity. Travelodge operates 470 hotels primarily in the U.K. with nine in Ireland and four in Spain. The company reported a 20% increase in profits last year to £55 million, but has been struggling to deal with its mounting debt problems and increasing interest payments.The final option is for Avenue Capital and GoldenTree to proceed with a debt against equity swap, giving total control over the company. In this case, DIC would lose up to £400 millions, considering the price being paid for the hotel group in 2007.
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