KPMG ADMINISTRATORS have managed to successfully push through a rescue deal at struggling hotel business Travelodge.
The company has entered into a deal known as a Company Voluntary Arrangement (CVA), which will see it repay creditors a percentage of debts over a contracted period of time, under the supervision of an insolvency practitioner.
Richard Fleming, UK head of restructuring at KPMG and supervisor, said: “The approval of the CVA also means that £709m of debt will be written off and new equity of £75m provided by the lenders.
“This will finance a £55m refurbishment programme across 175 of the business’s hotels, a move which will benefit customers and landlords alike.”
In order for a CVA to be approved, 75% of creditors, by value of debt, need to vote in favour of the proposals.
Earlier this month, as details of the proposal came to light, landlords criticised the arrangement which would see a fifth (109 properties of the 456-strong portfolio) subjected to rent reductions.
Fleming (pictured) said creditors should receive about 23.4p for every pound owed under the CVA, whereas creditors would have received just 0.2p for every pound owed if the deal had collapsed and the company entered into administration.
“Today’s vote saw us secure significantly more than this [75%] majority and also, importantly, the support of the landlords, with 97% of all creditors and 96% of landlords voting in favour of the CVA,” said Fleming.
“We have listened to the views of landlords and incorporated their feedback into this proposal. This includes a clawback clause, to enable landlords to share in the turnaround of the business, and the assurance that the company will pay the business rates on the affected properties until replacement occupiers are found.
“We are also offering landlords the option to extend their lease terms, which has not been offered in a CVA before and is an addition designed to offer as much value to landlords as possible.”
Other terms of the deal include injecting at least £75m of new money into the company, and investing £55m into a major refurbishment programme across the estate, covering more than 11,000 rooms and 175 hotels.
The refurbishment programme will commence in early 2013 and continue to the summer of 2014. Bank debt of £235m will be written off and £71m repaid, reducing total bank debt from £635m to £329m; the repayment date of the remaining debt will be extended to 2017 and cash pay interest will be reduced significantly to a rate of 0.25% above Libor through to the end of 2014.
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Peter Saville, Ryan Grant and Anne O’Keefe of AlixPartners will now become the supervisors of the CVA and monitor the implementation of the proposal