Travelodge Launches CVA Plan, Requests £144M Landlord Rent Reduction Until 2021-End; Shareholders to Provide £60M Credit Facility, £40M Additional Capital

Relevant Documents:
CVA Announcement
Deloitte Appointment
Press Release

Travelodge has announced the details of its proposed company voluntary announcement, or CVA, requesting a £144 million reduction in rent until Dec. 31, 2021. Shareholders have agreed to provide £60 million in a new super senior credit facility and up to £40 million in new equity, according to the announcement.

The company has appointed Deloitte as nominees to the CVA.

A large group of landlords had previously stated that it disagreed with the rent reduction proposals, which were included in a consent solicitation.

The CVA proposal includes:
 

• No planned hotel closures and no permanent rent reductions;
• In the period from the successful conclusion of the CVA until Dec. 31, 2021:
  • Landlords will be paid £230 million in rent, being approximately 62% of the contracted sum due; and
  • There will be a temporary reduction to landlord rents of up to £144 million. This is equivalent to 2% to 3% of the total rent due under the remaining lease term.
• The proposed temporary rent reductions will cease at the end of 2021 and landlords will return to 100% of contractual rent levels from the start of 2022;
• £240 million of shareholder support in the form of:
  • A new £60 million credit facility;
  • Up to £40 million of additional capital (subject to certain terms);
  • Use of significant cash reserves, which were approximately £100 million prior to the Covid-19 outbreak; and
  • The drawdown of the company’s existing £40 million revolving credit facility.
• Cash conservation including operating and capital cost savings and the utilization of the available government Covid-19-related support.

According to the company, the proposed temporary amendments to landlord rents result in:
 

• 77 leases that will receive their rent in full;
• 94% of leases that will receive at least 50% rent through to the end of 2021;
• 6% of leases that will receive zero rent during this period but will be paid all of their fixed charges. These hotels are either already loss-making assets or are likely to be loss-making in the period concerned;
• Landlords receiving the option to extend their leases by a term at least equivalent to the value of the rent foregone (three years minimum to five years maximum); and
• Landlords that have forgone rent receiving additional cash rental payments equating to a 50% share of the cumulative adjusted EBITDA generated by the group in the next three years in excess of £200 million.

To become effective, the CVA proposal requires 75% or more in value of the creditors voting at the creditors’ meeting to approve the CVA. In addition, at least 50% in value of creditors that are unconnected with the company must vote to approve the CVA. The meeting will be held virtually on June 19.