Travelodge, the budget hotel operator, has been saved from administration by a company voluntary arrangement (CVA)which was approved by creditors. This has allowed the operator to slash its rents payable to landlords on 109 of its 500 hotels by 25% for 3 years. As part of the deal Travelodge are offloading 49 of its hotels and paying a reduced rent of 55% on those until they are sold. KPMG who have arranged the CVA said that unsecured creditors will receive a dividend of 23.4% instead of the return of 0.2% in the case of administration.
Yet again, the press and media call the company voluntary arrangement "controversial"!! The deal was approved by 97% of the creditors and 96% of the landlords. In order to get a CVA approved you need 75% of the creditors to agree. The main lenders to the group Goldentree Asset Management, Avenue Capital and Goldman Sachs have agreed to write off £709m of debt. As part of the deal £55m will be injected into the hotels for refurbishment. Which is needed given the debt payments left precious little for essential freshening up.
All in all this is a fantastic result for Travelodge and shows the power of the CVA mechanism. None of the hotels are going to be immediately closed but put on the market.
In a further effort to bring in cash the hotels are having a 70% off sale allowing people to book rooms for £25. The overall occupancy rate I am not sure of but this sort of sale is sure to help.
