Hedge funds set to seize Travelodge
BUDGET hotel chain Travelodge is set to fall into the hands of two US hedge funds as it struggles under the burden of interest payments on its £530m debt pile.
Avenue Capital and Golden Tree Asset Management, who are among the major creditors that have bought up its loans, have joined forces with an unnamed investment bank and hope to agree a debt-for-equity swap with parent company Dubai International Capital (DIC), which could face a loss of around £400m.
The two funds, which specialise in buying loans of highly-indebted companies, have underwritten a £60m funding line which will enable Travelodge to avoid administration. It is in their interest to keep the company afloat because, as junior lenders, they would be wiped out if it collapsed.
Travelodge is currently assessing if senior lenders, such as Investec, Barclays and Royal Bank of Scotland, also want to participate. Debt restructuring talks began earlier this year.
DIC, which is backed by the emirate’s ruler, bought Travelodge from Permira for £675m in 2006. The deal was backed by £478m of debt.
The chain, which has 470 hotels across Britain, Ireland and Spain, increased profits 20 per cent last year to around £55m, and revenue rose 16 per cent to £370m, but it is one of many companies acquired at the height of the buyout boom whose debt levels are unsustainable in 2012. Interest payments are currently running at £100m a year and the firm has received an extra £10m from its creditors within recent weeks.
A spokesman for GoldenTree said: “GoldenTree has been a very supportive lender to Travelodge for many years and continues to work closely with the company and management.”
DIC could not be contacted last night. Avenue declined to comment.
Travelodge is run by Guy Parsons (left)
MEET THE HEDGE FUNDS
AVENUE CAPITAL
GOLDEN TREE
AVENUE Capital runs $12.5bn of assets from its New York headquarters and has offices in Britain, Germany, Luxemburg as well as five across Asia.
It was set up in 1995 by Marc Lasry and his sister, Sonia Gardner.
They are both experts in the area of distressed debt as well as being prominent donors to the Democratic party.
Lasry, a father of five, has an estimated wealth of $1.3bn (£820m), according to Forbes magazine.
Chelsea Clinton – the daughter of
former US President Bill Clinton – has previously worked for Avenue.
Golden Tree was founded in 2000 by Steven Tananbaum, the chief investment officer.
The New York fund also has offices in London, Luxembourg and Seoul and manages a variety of absolute return and long-only strategies. It says it looks for double-digit returns from “investing in companies with sound business models and management committed to deleveraging”.