Travelodge’s owner is preparing the chain of budget hotels for a possible sale of more than £1 billion, based on a strong domestic travel recovery.
GoldenTree American hedge fund, which acquired Travelodge back in 2012, is meeting with investment bankers to compete for the mandate of selling the 595-hotel chain. Sources in the city said that GoldenTree was looking for £1.2 billion to buy Travelodge.
GoldenTree is a credit investor that manages assets worth about $50 billion (£39.8billion). The company wants to capitalize on the strong trade at UK’s second-largest hotel chain where rooms begin at £37 per night. Travelodge, Premier Inn and its bigger rival both benefit from the consumers switching to cheaper options as well as the trend of staycations.
Travelodge’s chief executive Jo Boydell reported that the company had underlying sales in 2017 of £909.9million, which is a 25% increase over pre-pandemic figures. The underlying profit was £212.9million.
Travelodge has changed owners several times since Charles Forte opened its first UK outlet at Burton upon Trent, in 1985. The chain was acquired by Permira, a private equity firm in 2003. It had been part of the Granada Group before it demerged.
Permira sold Travelodge to Dubai International Capital in 2008 for £675m. This highly leveraged transaction left Permira exposed during the financial crisis of 2008. Travelodge, a hotel chain owned by GoldenTree and Goldman Sachs, was acquired in 2012 through a debt for equity swap. GoldenTree then took over the company.
UK leisure businesses continue to be in high demand by investors, despite a slowdown in dealmaking in general. This is due to the continuing surge of staycation holidays. Brookfield is looking for buyers for Center Parcs as part of a deal which the private equity firm hopes will generate between £4 billion to £5 billion. Whitbread, the owner of Premier Inn, is looking to sell 250 pubs and restaurant to allow it to concentrate more on its budget hotel chain.
Travelodge announced last month it would be opening 300 new locations in the UK. The company cited a high demand for business trips by “blue-collar” workers as a reason. The company issued £550m of bonds in April as part of an overall refinancing.
The list of prospective buyers will be shortened as all of its hotels are under lease. Potential buyers may also be concerned about the labour shortages in the hospitality industry.
GoldenTree has been reported to prefer a sale over a public offering of Travelodge. Goldman Sachs, with its vast knowledge of the industry, is considered a strong candidate to receive the mandate for the sale.
Travelodge was forced to undergo a controversial restructuring known as a Company Voluntary Arrangement (CVA) to temporarily reduce its rent bill after hotels were forced to shut down during the pandemic. Nick Leslau and other landlords accused the owners of avoiding bills that they could pay.
GoldenTree specializes in seizing control over highly indebted businesses. The London-based firm, with an office in Mayfair, was one of three hedge funds who seized control over Debenhams through a debt to equity swap, before the company collapsed in 2020. GoldenTree recovered most of its initial investment.