The American hedge fund behind Travelodge is weighing a sale worth up to £1.2bn after almost a decade of ownership.
GoldenTree, one of three opportunistic funds that seized control of Travelodge more than a decade ago, is lining up bankers to explore a potential sale, according to City sources.
It comes after Travelodge’s two other Wall Street backers recently cashed out of the budget hotel chain. Avenue Capital and Goldman Sachs, exited the investment by selling stakes worth hundreds of millions of pounds to GoldenTree.
Earlier this year GoldenTree struck a deal with Travelodge bondholders owed £440m to extend the maturity of the debt from 2025 to 2028.
The agreement is seen as a prelude to a potential sale as it would give any acquirer an extra three years of breathing space before needing to either repay or refinance the debt. American boutique Moelis and Goldman Sachs’ advisory arm are among those believed to have been sounded out to run a prospective auction of the business.
A City source said: “They [GoldenTree] are desperate to get out.”
Travelodge employs 12,000 people across nearly 600 sites and is the UK’s second-biggest budget chain behind Whitbread-owned Premier Inn.
A potential sale comes as hotels benefit from a surge in demand following the end of the Covid pandemic with people eager to travel again after years of restrictions.
Travelodge recently reported record profits and revenue growth. Room occupancy in 2022 was higher than 2019 and room prices were up by nearly a quarter to reach an average of £64.31. Underlying earnings were £213m, compared with £129m pre-pandemic.
Any sale would come just two years after Travelodge’s landlords were forced to accept steep rent reductions. Travelodge used a company voluntary arrangement – a process led by an insolvency practitioner to reduce debts – to cut its rent bill in 2020 at a time when international travel came to a standstill.
Under the terms of the deal, landlords were able to recoup lost rent if profitability was higher than an agreed threshold. Travelodge was forced to pay landlords £13m in April this year, according to recent corporate filings, after a strong rebound in occupancy.
Travelodge is helmed by Jo Boydell, the chain’s former finance chief, who took over from Craig Bonner last summer. Mr Bonner himself had only been at the helm of the hotel chain for only 18 months.
Former Center Parcs chairman Martin Robinson was brought in at a similar time to Mr Bonner to act as Travelodge’s chairman.
Golden Tree Asset Management and Avenue Capital joined Goldman Sachs in seizing control of Travelodge after swapping their loans for equity in the business in 2012. The trio ousted Dubai International Capital, which had bought Travelodge in 2006 in a £675m deal.
It is not the first time that Travelodge’s owners have weighed a potential sale of the business. Deutsche Bank was hired in 2015 to explore either an auction or stock market float. At the time the business was valued at £1bn.
Travelodge declined to comment.