KPMG in Manchester has been appointed to handle the company voluntary arrangement announced today by budget hotel chain Travelodge.
The Travelodge CVA proposes that all of the hotels currently trading will remain open. A total of 347 hotels, two offices and four restaurants will be retained at current rents and current payment terms throughout the CVA period. A further 109 hotels will be retained at a reduced equivalent monthly rent of 75% for three years before reverting to a market-based rent for the remainder of the lease terms.
The company is seeking to transfer 49 hotels to other operators within the next six months in order to minimise the impact on landlords and other creditors. In the meantime, rent on these hotels will be reduced to 55% for six months, which is similar to the previous high profile CVAs KPMG has supervised in recent years. An identical compromise is to be applied to 19 leases of premises which have been sublet to other tenants and to 18 leases of vacant sites.
Travelodge will continue to pay rates, which KPMG said was of great importance to landlords, until such time as replacement occupiers or operators are found. The CVA will contain a so-called 'claw back' clause aimed at allowing the compromised landlords to share in the turnaround of the business. Furthermore the 52 development sites where leases have exchanged but not yet completed will continue to be developed and proceed to opening.
Brian Green, restructuring partner at KPMG Manchester, said: "We are constantly seeking to improve and evolve our CVA structures, based on feedback from the landlord community.
"Accordingly, we are again including a 'claw back' mechanism for landlords so they can share in the turnaround of the restructured company's future and landlords are also being offered the option of lease extensions. The detailed terms of the CVA reflect those we have advised on since the start of the downturn. No hotels will be closed on day one, nor will there be any redundancies and suppliers will continue to be paid on time and in full."
A detailed CVA proposal document is expected to be made available to Travelodge creditors via a dedicated website today. The creditors will vote on the CVA on 4 September 2012. KPMG will spend the next three weeks in talks with creditors to ensure they understand the full detail of the proposal.
The CVA is being undertaken as part of Travelodge's financial restructuring. The key terms of the financial restructuring are as follows:
- £75m of new cash
- £55m of the new cash injection invested into a refurbishment of 200 hotels
- Bank debt of £233m written off and £71m repaid, reducing total bank debt from £633m to £329m. Loan notes of £476m will be written off completely
- Repayment date of remaining debt extended to 2017 and cash pay interest reduced to 0.25% above LIBOR through to end of 2014