Budget hotel chain Travelodge is set to change ownership as it moves close to collapsing under a mountain of debt.
The company, which owns 470 hotels across the UK, Ireland and Spain and employs around 6,000 staff, has six weeks to raise £60 million or it could face administration, The Sunday Times reported.
Two US hedge funds, Avenue Capital and Golden Tree Asset Management, are expected to step in with the money needed in return for control of the business, which is owned by private equity firm Dubai International Capital (DIC).
Travelodge is thought to be trading well but is struggling to deal with £530 million of debts, accrued during a buyout spree before the financial crisis set in.
Avenue Capital and Golden Tree specialise in taking over struggling businesses by taking ownership in return for writing off debts.
The two firms, which control funds of about $35 billion between them, are understood to be planning to provide the cash to prevent Travelodge from defaulting on its loans – its interest bill alone is £100 million a year.
DIC, which paid £675 million for the chain in 2006, could try to retain its stake in Travelodge, but this is reportedly unlikely.
Riots in England cost Travelodge £1 million last year after it received more cancellations than bookings in the two weeks surrounding the mayhem.
Some 81 hotels were in areas caught up in the chaos and although none were forced to shut, many received high levels of cancellations, particularly in London.
Travelodge has secured a £60 million line of funding and is trading well, a spokesman for the business told Reuters.
The medium term loan facility, which replaces an existing line, has been underwritten by junior lenders including US firms Golden Tree Asset Management and Avenue Capital, he said.
Travelodge was currently assessing if senior lenders, such as Investec , Barclays and Royal Bank of Scotland , also want to participate. Debt restructuring talks began earlier this year.
The spokesman said Travelodge saw 2011 profit rise 20% to about £55 million on revenue up about 16% to £370 million.
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