Travelodge set to launch CVA amid landlord battle

Travelodge will reportedly launch a formal restructuring plan, with an announcement expected to be made today (3 June).

According to Sky News, the budget hotel group is expected to outline a plan that will see its shareholders inject £40m into the group as part of a new CVA proposal. 

Deloitte has been appointed to oversee the CVA, which is reportedly expected to “win over” sceptical landlords and restore confidence in the hotel group. 

A Travelodge insider told Sky News that the restructuring proposal was “not a traditional CVA”, as it would result in no site closures. In addition, they said that all 564 sites would revert to their full rent agreements from the end of next year.

The insider added that landlords would receive £230m in rent for the period between the conclusion of the CVA and 31 December, 2021.

Payments equating to a 50% share of any EBITDA above £200m during the next three years have reportedly also been promised to landlords.

All landlords who have a rent reduction will also have the option to break their leases within six months, which “makes this a very fair proposal”, according to Travelodge. If a compromised landlord does not like this proposal, they can also take their properties back.

Altogether, landlords are now being asked to forego £144m of the total £4bn in rent due overall, the budget hotel group said.

In addition, an earlier proposal to secure a further £60m in borrowing capacity has now been increased to £100m, according to reports.

News of the proposed CVA comes in light of an ongoing battle between Travelodge and its landlords. 

Last month, the hotel group reportedly asked landlords for a rent reduction of £146m over the next two years as it continues to shore up cash amid the ongoing pandemic. It also proposed that rent is paid monthly, rather than quarterly, until the end of next year. 

The proposal came only days after landlords were reportedly putting pressure on Travelodge to pay its rent, with claims that the budget hotel operator was “taking advantage” of the coronavirus crisis to cut bills that it can afford to pay. 

A spokesperson told Hotel Owner: “Travelodge has been an extremely successful business and it has suddenly been faced with a very difficult situation. 

“The proposal does ask for some big injections of cash by shareholders and substantial temporary rent reductions from landlords – but it is fair and will help the company get through the crisis, which is in everyone’s interests.”

They added that the move was needed in order to save 10,000 jobs and “secure the long term future of the business”.