BUDGET hotel chain Travelodge has been saved from the brink of administration after landlords yesterday agreed to a controversial rescue deal that sees their rent takings slashed.
The company voluntary arrangement (CVA) – voted through by 97 per cent of creditors and 96 per cent of landlords – allows Traveldoge to offload 49 of its 500 hotels and pay 55 per cent less rent until they are sold.
Landlords at a further 109 hotels have agreed to cut rents by 25 per cent for three years before they revert to a market-based rent.
KPMG, which arranged the CVA, said creditors will receive a return of 23.4p in the £1, versus the 0.2p in the £1 if the business had been forced into administration.
The group’s main lenders – US hedge funds GoldenTree Asset Management and Avenue Capital Group plus Goldman Sachs – have agreed to write off £709m in debt as a result of the deal.
They have also pledged to invest £75m, of which £55m will be spent on refurbishing some 175 hotels.
The chain, which posted a 20 per cent profit rise last year, has had no problem attracting customers but its £1bn debts brought it to its knees.
Its trio of lenders recently seized control of the hotelier via a debt-for-equity swap with its previous owners Dubai International Capital, who paid £675m for Travelodge in 2006 in a highly leveraged deal.
The company is the latest in a string of household names to seek a CVA including Fitness First and JJB Sports.
Liz Peace, chief executive of the British Property Federation said yesterday’s deal will save around 6,000 jobs but warned of the wider impacts on the property sector: “If landlords now have to accept that a ‘contract’ entered into in good faith by both parties can simply be renegotiated when one side no longer likes the terms, it throws into doubt the whole basis on which a commercial property investment is appraised and financed.”