Travelodge announces restructuring effort

Hotel News - 23/08/2012

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UK hotel firm Travelodge is set to undertake a major debt restructuring effort.

The new £635 million agreement will reportedly hand control of the hotel chain to its lending agencies - Avenue Capital Group and GoldenTree Asset Management. The news comes more than a year after lenders said that they would be assuming control of the firm as a result of contract breaches.

Officials said last week that the scheme aims to reduce the total debt of the Dubai-owned firm by £329 million whilst injecting some £75 million in cash toward renovation efforts. The company said £55 million in cash would go directly to refurbishments in some 11,000 Travelodge rooms in 175 properties around the UK.

At the same time, the plan will see the payoff period for the company’s remaining debts extended until 2017.

Experts say the hotel chain’s struggles began at the start of the economic downturn, which exacerbated growing debt and lease agreement problems.

According to Travelodge’s advising partner KPMG, the firm is to sell off nearly 50 properties but the balance of its hotels will stay open for business.

Travelodge was purchased by Dubai International Capital (DIC) in 2006 in a deal reportedly worth £675 million. Reuters reports that DIC will now undergo lease renegotiations under the oversight of a London High Court to finalise the restructuring scheme.

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