The privately-held owners of budget hotel chain Travelodge are eyeing a sale of the business for upwards of £1.2 billion, the Sunday Times first reported.
The planned sale by an investment consortium led by US asset management firm GoldenTree comes as the business has ridden out a bruising downturn during the pandemic as well as a much-publicised fallout with its landlords over non-payment of rent to see its revenue and profits boom.
The Sunday Times reports that its owner of nearly a decade is in talks with investment banks to explore a potential sale of the chain, which has 595 hotels.
In its latest financial results, it said revenues were 25% up from 2019 to £909.9 million, while pre-tax earnings for the year had lifted by £83.8 million to £212.9 million.
Travelodge's attempts to reduce its rent payments during lockdown, which were ultimately approved via a company voluntary arrangement, became one of the most notable examples of the breakdown in relations between company owners and landlords during lockdown over who should foot the bill for the damage done to the leisure sector.
The CVA, rubberstamped in June 2020, was unusual in that it involved no closures but a mix of rent reductions, waivers and moves from quarterly to monthly payments.
During negotiations landlords at many of Travelodge's UK hotels, which include some of the UK's biggest real estate investment trusts, property companies and fund managers such as Secure Income REIT, IM Properties, M&G Real Estate, Abrdn and Legal & General, were aggrieved by a proposed banding of hotels for payment.
Landlords, and particularly Secure Income REIT, were aggrieved by the sense that Travelodge's shareholders – the consortium of GoldenTree Asset Management, Avenue Capital and Goldman Sachs – had combined the unpalatable mix of being extremely well-capitalised with difficult to negotiate with over payment.
Founded in 1985, Travelodge has 595 hotels, most in the UK, and underwent its first CVA in 2013.
Goldman Sachs, GoldenTree and Avenue Capital acquired Travelodge Hotels Limited in a debt restructuring in 2012 and in 2014 agreed to buy the 144 UK hotels in the Grove portfolio leased to Travelodge in 2014 for circa £500 million. The sellers were Lloyds Banking Group, Prestbury Investment Holdings, which was a circa 15% investor in Secure Income REIT, West Coast Capital and Aldersgate Investments.
In 2016 Secure Income REIT reached agreement to buy 55 of the Travelodge hotels for £196.2 million financed by a proposed £140 million share placing and a £60 million seven year non-recourse secured debt facility agreed with M&G.
In March 2018 Secure Income REIT bought a further 76 Travelodge hotels from the GoldenTree, Avenue Capital and Goldman Sachs consortium.
Travelodge declined to comment.