Travelodge is on the verge of being taken over by two American hedge funds, enabling it to raise the £60m required to prevent the business defaulting on its loans of £528m.
Avenue Capital Group and Golden Tree Asset Management - which have both been financial backers of the budget hotel group since it was acquired by Dubai International Capital (DIC) for £675m from Permira in 2006 - have agreed to underwrite the £60m to avoid Travelodge facing administration.
This will result in a debt-for-equity swap with DIC, giving control of Travelodge to Avenue Capital and Golden Tree, who are now asking the other major lenders to the hotel group, which include the Royal Bank of Scotland, Investec, Barclays and Babson Capital Management, to consider participating in the rescue of the company.
Travelodge's precarious financial position dates back to DIC's purchase of the group which it bought with loans of £478m. It paid an additional £20m into Travelodge in 2010 after the company breached the terms of its loans, but it is believed it is now not willing to stump up further cash.
A spokesman for Travelodge said that the performance of the company had not been impacted since news first broke of its financial difficulties. "The group is performing well with pre-tax profits up 20% to £55m last year and revenues up 16% to £370m."
The 500th Travelodge is set to be opened by the Minister of Tourism, John Penrose, at Stratford, London, next week.
By Janet Harmer
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