Alice Hancock and George Hammond at the Financial Times report that Travelodge is set to launch last-resort bankruptcy proceedings that will legally allow it to slash rents in an attempt to end a fractious dispute between the hotel chain and its landlords.
According to the FT, the company was set to file documents for a company voluntary arrangement, a restructuring measure increasingly used by ailing retail and leisure operators, yesterday, June 3. Unlike standard CVAs, Travelodge will not shut any of its 564 sites or permanently cut rents, the FT notes.
Instead it plans to pay landlords GBP230 million in rent for this year and next — roughly half of its annual bill, the FT states.
The budget hotel operator has been in a tit-for-tat dispute with its landlords since it refused to pay rent for the second quarter at the end of March, the FT relays.
Landlords claimed that the hotel chain, which is backed by the New York hedge funds, Golden Tree Asset Management and Avenue Capital and the investment bank Goldman Sachs, was taking advantage of the pandemic to cut bills that it could afford to pay, the FT discloses.
The landlords previously offered to write off one quarter’s rent and allow Travelodge to reduce its bill by 20% for the rest of the year, adding that if the company did not agree to the terms, they would forfeit the leases as soon as they were legally allowed to and replace Travelodge with a new budget hotel brand, the FT recounts.
Viv Watts, who is representing a group of around 150 landlords, has lined up the designers of Travelodge’s own signage to create “Travelodge 2.0″, the FT relates.
Under the CVA proposals, Travelodge’s shareholders have agreed to inject GBP40 million cash into the business and make a GBP100 million available in additional reserves, according to the FT. The company would start paying full rents again at the beginning of 2022, the FT notes.
The plans are subject to the agreement of 75% of the chain’s creditors by value of the debt owed to them, most of whom are its landlords, the FT says.