Budget hotel chain Travelodge is undertaking a Company Voluntary Arrangement (CVA) after months of negotiations with landlords.
Shareholders are supporting the business with the use of more than £100m in reserves, taking on £100m in extra debt and putting in up to £40m in new equity The group is expected to launch the CVA today, which is hoped to save the jobs of 10,000 people, secure the long-term future of the company and will not involve any hotels being permanently closed.
The business is understood to have taken a £350m hit to sales following the outbreak of Covid-19 in the UK and the government-enforced closure of hotels except for the accommodation of key workers, with the CVA left as "the only option" after negotiations that have seen legal action and threats of eviction.
The proposals are expected to include around 94% of the group's leases receiving at least 50% of rent through to the end of 2021, a step up from previous proposals, while 6% (37) of leases that are loss-making and are likely to be loss-making for some time (such as airport hotels) will receive no rent until this time but will be paid all fixed charges. All hotels will then return to full rent from the end of 2021.
To help mitigate the rent foregone, Travelodge is giving landlords the option to add on an extra term to their lease of at least the same value (three to five years) and landlords will also get a 50% share of any earnings (EBITDA) above £200m over the next three years.
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