While cautiously acknowledging a rescue deal for the struggling hotel chain the British Property Federation (BPF) has called for a review of the Company Voluntary Agreement (CVA) system that pits landlord against landlord.
KPMG today published details of a proposed deal which would see rents reduced on 158 of Travelodge’s 512 hotels.
Despite struggling with over £1bn of combined secured and unsecured debt, the budget hotel chain last year saw profits rise 20 per cent to £55m and revenues up 16 per cent to £370m. This strong performance in the economic downturn, however, hasn’t been enough as the business has struggled under its mountain of debt and today’s CVA will see some creditors take a ‘haircut’ on their debt – so long as 75% of the unsecured creditors vote through the proposal at a creditor meeting.
Liz Peace, chief executive of the British Property Federation, said: “Once again landlords are being asked to play a significant part in rescuing a business, and a minority at that, who are being asked to take a big ‘hit’ to keep a far bigger business afloat. At least in this case, unlike many others, the pain is being shared amongst the other creditors, which we welcome, and dependent on the CVA being accepted the business will get new investment, which should put it on a far sounder future footing.
“We are becoming increasingly concerned, however, with a system that creates such a range of winners and losers and allows advisers to dice and slice creditors to reach the required voting thresholds. Everyone can only work within the rules that are set, and in this case the insolvency practitioners are simply working to get their job done, but what we are saying is that such rules need reviewing and some greater sense of fairness restored.”
