Travelodge's loan prices hint at restructuring

Dubai-owned budget hotelier secondary loan prices at distressed level

Operators, Dubai international capital, Travelodge

British budget hotelier Travelodge's secondary loan prices have fallen to deeply distressed levels, which suggests the company could be moving towards a restructuring, several bankers said on Monday.

Loans in the company, owned by Dubai International Capital (DIC), are attracting interest from investors in distressed assets, the bankers said.

Travelodge declined to comment.

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It is only a couple of weeks since the company announced a £246m ($385m) expansion programme to open 41 new hotels and create 1,000 new jobs.


The low levels quoted on Travelodge's loans suggest that the company's subordinated junior debt could suffer heavy losses in any restructuring.

"Loans in Travelodge have dropped significantly since the start of the year, and there are various problems with its capital structure which need to get sorted out," one of the bankers said.

The company's payment-in-kind note (PIK) is being quoted in the secondary loan market at 31 percent of face value, down from 47 at the beginning of January, according to Thomson Reuters LPC data.

Its mezzanine loan is being quoted at 58.2 percent of face value, down from 74 at the start of January, and one trader said that prices were even lower.

Its second-lien has dropped 10 points to 65, while its senior term loan is being quoted in the low to mid 70s, compared with 81 since the start of 2012.

Travelodge was bought by DIC in 2006 for 675 million pounds backed by 478 million pounds of debt including a 30 million pound second-lien facility, a 75 million mezzanine tranche, and a 50 million pound payment-in-kind note, Thomson Reuters LPC data shows.

DIC, a unit of Dubai Holding, the conglomerate owned by the emirate's ruler, reached an agreement in November with creditors for a $2.4 billion debt restructuring. In October, DIC sold hotel operator Ishraq Dubai and earlier in the year sold its 45-percent stake in valve maker KEF Holdings Inc for $178 million.

In addition to Travelodge, DIC's existing assets include British engineering company Doncasters and European aluminium maker Almatis Holdings.


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