The business has entered a Company Voluntary Arrangement (CVA) with its creditors, which will allow it to renegotiate rents and leases across its remaining 109 hotels. The restructuring will see its debt reduced to 329m and a further £75m injected into the business by three major investors for refurbishment work.
“The financial restructuring, including the CVA, will leave Travelodge in a much stronger position going forward and will ensure a long-term, sustainable future for the business,” said Travelodge chief executive Grant Hearn.
"Once this joint process is completed, Travelodge's debt, interest costs and lease liabilities will be significantly reduced. This new appropriate level will provide greater security for our staff, suppliers, landlords and developers. This is a successful brand with millions of customers and the company will emerge in excellent shape from this process."
The CVA is expected to take approximately 17 days to complete and Travelodge said all of its hotels would continue to operate normally, with all suppliers being paid as normal.
Writing off debts
The news has prompted a call for a review of CVAs by the British Property Federation, which believes the agreement leaves landlords out of pocket and allows companies to write off huge debts.
BPF chief executive Liz Peace said: "Once again landlords are being asked to play a significant part in rescuing a business, and a minority at that who are being asked to take a big hit to keep a far bigger business afloat."
But accountancy firm KPMG, which is organising the CVA, argued for the use of CVAs. The firm’s head of restructuring, Richard Fleming, said: “With the support of its lenders, shareholders and landlords, the company will be able to reshape its debt and operational structure to a model more suited to these straitened times."
Travelodge is the UK's second biggest budget hotel chain behind Whitbread's Premier Inn and reported a 20 per cent increase in profits last year to £55m. The CVA is expected to take approximately 17 days to complete and Travelodge said all of its hotels would continue to operate normally.