Former DIC hotel asset wins debt deal backing

UK budget hotel chain Travelodge, owned by Dubai International Capital until last month, on Tuesday won backing for a controversial rescue plan as it battles to overcome its debt burden.

The deal will see the company offload 49 of its poorer-performing hotels to other operators, and slash rent payments by 25 percent across 109 other hotels.

The arrangement - known as a company voluntary arrangement (CVA) - was voted through by the budget hotel chain's creditors in a vote on Tuesday.

It is hoped the deal will see Travelodge, which operates more than 500 hotel chains across the UK, Ireland and Spain, strengthen its balance sheet and reduce the interest rate on its debt.

The company plans to write off £476m of loans and postpone paying back £329m of debt until 2017 under the CVA.

Last month Travelodge agreed a £635m ($999.6m) debt restructuring that gave lenders control of the business and confirmed a significant loss for its Dubai owners who bought the company in 2006.

The company's three main lenders - Goldman Sachs and two US hedge funds, Avenue Capital and GoldenTree Asset Management - will provide a cash injection of £75m, with £55m being spent on refurbishing 175 of Travelodge's hotels starting early next year.

Travelodge fell victim to the economic downturn, coupled with a large debt burden and expensive lease arrangements.

DIC bought Travelodge, whose promotions include rooms for £10 a night, from private equity firm Permira in 2006 for £675m, backed by loans of £478m.