Coronavirus: Travelodge sweetens landlord deal to seal crunch vote
Travelodge has bowed to landlord pressure and amended key terms of its financial restructuring, Sky News learns.
Tuesday 16 June 2020 16:10, UK
The budget hotel group Travelodge has sweetened its offer to landlords ahead of a crunch vote on Friday that it says is critical to preserving 10,000 hospitality sector jobs.
Sky News has learnt that the company, whose shareholders include the Wall Street bank Goldman Sachs, has made a string of concessions in a bid to win over angry property-owners.
Landlords, many of whom had organised themselves into an action group, believed they were being forced to shoulder the burden of a financial restructuring being undertaken by Travelodge because of the COVID-19 pandemic.
Sources said on Tuesday that the hotel chain was now:
- proposing to increase the share of profits that would be handed to landlords above a £200m threshold
- pledging that shareholders would not be able to take money out of the company until landlords had been fully repaid
- making it easier for property-owners to exercise break clauses in their contracts with Travelodge
The vote on Travelodge's Company Voluntary Arrangement (CVA) is due to take place on Friday.
Crucially, Secure Income REIT, the vehicle headed by the property entrepreneur Nick Leslau, is expected to vote in favour of the revised proposals.
Secure Income, which is Travelodge's biggest landlord with 123 hotels, had been agitating for an improved deal.
Mr Leslau told Sky News: "We have been negotiating hard for the benefit of all property-owners to improve the terms of the CVA and the improvements are reflected in the terms outlined today by the company.
"The landlord-only break clause has certainly been a game-changer and provides those landlords who do not want to continue with Travelodge as their tenant, to take an early surrender.
"Subject to agreeing the all-important detailed documentation around these new amendments we will be recommending that the Secure Income REIT plc board votes in favour of the CVA this Friday."
The restructuring deal, which had been assembled by the chain's adviser, Deloitte, included a commitment from shareholders to inject up to £40m of new equity, according to a source close to the process.
A previous earlier proposal to secure an additional £60m in borrowing capacity was increased to £100m when the CVA was launched two weeks ago.
Travelodge has been proposing to cut its rent payments by hundreds of millions of pounds to see it through the coronavirus pandemic.
Mr Leslau and others have argued that while they are being asked to agree to steep - albeit temporary - rent cuts, the company's current shareholders will retain 100% ownership of its equity.
The chain trades from 564 sites, all of which will revert to their full rent agreements from the end of next year if the CVA is approved.
Travelodge declined to comment.