US hedge funds to rescue PE-backed Travelodge

The company, which employs more than 6,000 people, needs to raise £60m to survive. The chain currently has borrowings of £530m and pays annual interest of £100m. As a result, the debt-heavy takeover in 2006 is blamed by many as the source of strife.

In 2006 Dubai International Capital acquired Travelodge from Permira for £675m, including loans totalling £478m. The Gulf state-backed private equity house stands to lose up to £400m if Travelodge goes into administration.

After injecting emergency capital, Avenue and GoldenTree plan to take control of the company through a debt-for-equity swap.

Travelodge maintains a positive outlook, reporting a 20% growth in profits to £65m in 2011 and a 16% increase in revenues to £370m. The hotelier intends to open 41 new hotels this year, including a further 11 in London.

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