Dubai-owned Travelodge seeks to fix debt problem

Travelodge, the British budget hotelier owned by Dubai International Capital (DIC), is expected to pursue a company voluntary arrangement (CVA) as seeks to deal with its crippling debt.

A CVA, which would enable the firm to pay its debts off over time while turning its business around, is considered the best way of removing itself from uneconomic leases on up to 50 of its 513 hotels after landlords refused to agree to revised terms, British media reported.

The move is one of several moves being considered which also include an injection of fresh equity and reducing the number of hotels it operates.

The CVA would form part of a wider financial restructuring involving hedge funds Avenue Capital and GoldenTree Asset Management joining Goldman Sachs to take over ownership from DIC.

The hotelier, which operators over 500 hotels across the UK, Ireland and Spain, started restructuring discussions with lenders in December 2011.

DIC, the international investment arm of Dubai Holding acquired Travelodge from the European private equity firm Permira in 2006 for GBP£675m (US$1.06bn), backed by loans of GBP£478m, including a GBP£30m second-lien facility, a GBP£75m mezzanine tranche, and a GBP£50m payment-in-kind note, according to data from Thomson Reuters.