LONDON (ShareCast) - Debt-laden hotel chain Travelodge has agreed a rescue deal that will substantially reduce borrowings and see control of the group pass to a consortium of investment firms.
US investment bank Goldman Sachs (NYSE: GS - news) and hedge funds Golden Tree Asset Management and Avenue Capital Group have taken control of the company and have pumped £75m of cash into the business, of which £55m will be used to spruce up 175 of its older hotels.
The chain was previously owned by private equity firm Dubai International Capital, which issued a £482m eurobond to acquire the already debt-burdened firm.
Reports suggest that the company's debt was in the region of £635m, and with annual interest payments said to be around £100m a year, a restructuring had become a critical necessity. Under the new deal, around £235m of bank debt will be written off, and £71m will be repaid, cutting the chain's debt mountain to less than £329m. Reports indicate that holders of the £482m eurobonds have written off their investment entirely.
The business will have until 2017 to whittle its dent down to zero. To achieve that aim, the new owners want to renegotiate leases on many of its hotels, especially those that were made at the height of the property boom, before the credit crunch.