Budget hotel operator Travelodge has entered into a Company Voluntary Arrangement (CVA) to allow it to restructure its business while keeping its hotels open.
Travelodge has been in negotiations since March with its landlords to secure a waiver of rent, up to £146 million according to reports. The proposed rent reductions would represent 67.7% of rents otherwise receivable from Travelodge from 1 April to 31 December 2020 and 26.1% throughout 2021. Thereafter rents will be restored to the levels set out in the existing leases. Unlike most CVAs, there are no proposed hotel closures or permanent rent reductions that persist beyond the period ending 31 December 2021.
The hotel currently operates 564 hotels however all but a few have remained closed during the lockdown, with some remaining open to support care workers.
Travelodge is owned by investment firms including Goldman Sachs, Avenue Capital and GoldenTree and has £100m in cash reserves. Its shareholders have pledged to inject up to £40m in new equity into the business and raise £100m in new debt as part of a turnaround plan.
There are no proposed hotel closures or permanent rent reductions. Prior to the outbreak of COVID-19, Travelodge began the year with a record level of cash reserves and delivered five straight years of strong growth, outperforming the midscale and economy sector and its peers.
However, the COVID-19 outbreak has had a significant impact on the broader UK economy and the hospitality sector in particular.
The CVA proposal includes: ·
- No planned hotel closures and no permanent rent reductions · In the period from the successful conclusion of the CVA until 31 December 2021
- Landlords will be paid £230m in rent, being approximately 62% of the contracted sum due
- A temporary reduction to landlord rents of up to £144m, equivalent to 2-3% of the total rent due under the remaining lease term
- The proposed temporary rent reductions will cease at the end of 2021 and landlords will return to 100% of contractual rent levels from the start of 2022