Published on Wednesday, June 3, 2020

Travelodge to file for form of bankruptcy to save 10,000 jobs

Budget hotel chain Travelodge is to file for a form of bankruptcy after losing £350 million of sales due to the lockdown.

It said that it has no option but to apply for a Company Voluntary Arrangement to save 10,000 jobs and secure its long-term future.

A CVA allows an insolvent company to continue trading and gives it a fixed period to pay its creditors.

Travelodge is asking landlords to accept a 38% rent cut on its 564 hotel portfolio until December 2021, after which it has promised full rents will be paid.

Under its proposal, about 94% of its landlords will receive at least 50% of their rent until the end of next year, but 37 leases (6% of the total), including some loss-making airport hotels, will receive no rent until 2022.

To try to persuade landlords to accept the CVA, Travelodge is offering them a 50% share of any profit above £200 million over the next three years. In the last three years, it made at least £300 million.

Travelodge shareholders have agreed to take on a further £100 million in debt and pump in an additional £40 million in new equity.

All Travelodge's hotels have been closed since March 24 and aren't expected to reopen until July 4 at the earliest. In a normal year, the company would make 70% of its profit between April and September.

It expects its profits to be halved this year, losing £350 million, which is the equivalent of 18 months' rent.

The hotel chain said that if its creditors accept its CVA, it doesn't plan to permanently close any of its properties.

A creditors' meeting will be held on June 19. Holders of three-quarters of its debt must agree to the CVA or Travelodge could face voluntary liquidation.