Have a read of this, might change your mind. They could be as bad as H&G at times.
In the long history of disastrous leveraged buyouts, a place must be reserved for Travelodge, the 500-strong budget hotel chain which has escaped administration only because its landlords approved one of those company voluntary arrangement proposals where they agree to suffer a lot of pain rather than excruciating pain. Or, to use the estimate of KPMG, acting as supervisor of the CVA, affected landlords will get 23p in the pound versus 0.2p in administration. Yes, that's the sort of choice that gets a 96% majority.
It is not, however, an outcome that draws an explanation, let alone an apology, from the folk who imposed the calamitous high-debt financing structure on Travelodge in 2006. That outfit was Dubai International Capital. DIC long ago wrote off its investment in Travelodge and is reckoned to have lost £400m, which perhaps explains its reluctance to rake over the coals.
All the same, it is hard to swallow Travelodge management's regular pleas that DIC was not reckless. Yes, there were a lot of highly leveraged deals in that 2005-07 era but, come on, DIC was buying the business for £675m from another private firm, Permira, that had already doubled its money and given Travelodge's property portfolio the sale-and-leaseback treatment. DIC, by gearing up the business yet again in 2006, was piling leverage upon leverage and hoping recession would never arrive.
When it duly did, the numbers went horribly wrong and debt-servicing became the priority. The company is now controlled by two US hedge funds, Avenue Capital and Golden Tree, plus Goldman Sachs. They may not sound the most cuddly of owners but at least they've recognised what damage has been done to a profitable company by having to divert most of its earnings into interest payments for so many years. Some £55m of new cash has been earmarked for a complete refurbishment of 175 hotels.
From this point, one suspects life will become considerably better for Travelodge. Whitbread-owned Premier Inn, the other half of the budget hotel duopoly in the UK, has proved for years that there's good money to be made in this sector even in cold economic conditions. Whitbread may care to boast about Premier Inn's superior quality (fair enough) but the main difference between the two chains is that one was run under a ludicrous financial structure and one was not.
http://www.theguardian.com/business/nils-pratley-on-finance/2012/sep/04/travelodge-buyout-pain-dubai-nils-pratleyIn terms of Cavani, I'd like to have him here. One of the better options in a market currently lacking quality that's available.
