UK budget hotel inks DIC debt deal
London, August 18, 2012
Travelodge, a leading UK budget hotel chain owned by Dubai International Capital (DIC), said it has agreed a 635 million pound ($999.6 million) debt restructuring that will give lenders control of the business.
However, the deal confirms a significant loss for the hotel chain's Dubai owners who bought the company in 2006.
The announcement comes after lending sources told Reuters in February that the group's lenders would assume control of Travelodge after it breached loan agreements in 2011.
Under the restructuring, debt will be reduced to 329 million pounds from 635 million and new cash totaling 75 million pounds will be injected into the business for major refurbishment work, the company said on Friday.
DIC - which had already written down its investment in Travelodge - will hand the keys to mezzanine lenders including GoldenTree Asset Management and Avenue Capital Group.
Travelodge fell victim to the economic downturn, coupled with a large debt burden and expensive lease arrangements. Its adviser KPMG said all existing hotels would remain open though 49 would be sold to other operators.
DIC bought Travelodge, whose promotions include rooms for 10 pounds a night, from private equity firm Permira in 2006 for 675 million pounds, backed by loans of 478 million.
Under the restructuring, the repayment date for the remaining 329 million pounds of debt is extended to 2017 and interest payments are reduced to 0.25 per cent over Libor until 2014, to alleviate the burden while the hotelier's properties undergo refurbishment.
Some 55 million pounds will be invested to renovate more than 11,000 rooms and 175 hotels, starting in early 2013 through to summer 2014, the company said.
The group will undergo a so-called Company Voluntary Arrangement (CVA) - a type of reorganisation allowing firms to renegotiate rents and leases - at the High Court in London to complete the restructuring.-Reuters
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