Travelodge is attempting to secure rent reductions from its landlords to avoid closures and job losses at its 500-strong hotel estate.
The budget chain confirmed it was seeking a company voluntary arrangement with landlords to agree rent reductions on most of its sites to secure its financial viability, the Financial Times reported.
A CVA is a voluntary agreement between a company and its creditors. Such agreements have been used by retailers to renegotiate leases with landlords.
Travelodge’s debts of around £500 million have been mounting, despite solid trading in the group, amid a depressed UK hotel market outside London.
Revenues were up 16% last year to £370 million and profits rose 20% to about £55 million.
CVAs can be used to renegotiate unsecured debt or future payments such as leases rather than restructuring existing secured liabilities such as bank loans.
Travelodge owner Dubai International Capital has been in negotiations with the company’s biggest debt holders – Goldman Sachs and US-based hedge funds Avenue Capital and GoldenTree Asset Management – over a debt-for-equity swap that would eventually see DIC exit the company, according to the FT.
Travelodge announced in January that it would open 41 hotels in the UK this year and create 1,000 new jobs. Its long-term target is to create 1,100 hotels, comprising 100,000 rooms, by the middle of the next decade.
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