RLPC-DIC may hand Travelodge keys to lenders

LONDON Mon Feb 20, 2012 12:00pm EST

LONDON Feb 20 (Reuters) - Dubai International Capital is likely to hand the keys of British budget hotelier Travelodge to lenders including Golden Tree Asset Management and Avenue Capital, which are in talks to provide a new 60 million pound ($95 million) loan, lending sources said on Monday.

DIC, the private equity group backed by state-owned conglomerate Dubai Holding, is unlikely to stump up any fresh cash after writing its 400 million pound investment down to nothing, the sources said.

"DIC is working closely with the company and lenders to ensure that the right financing structure is in place for the business going forwards. DIC wrote off this investment in 2008, so is not facing any further losses on this investment," a spokeswoman for DIC said.

DIC bought Travelodge, known for its 10 pound-a-night rooms, from Permira in 2006 for 675 million pounds, backed by loans of 478 million pounds ($755 million).

Travelodge started restructuring discussions with lenders after breaching its loan covenants in December 2011, investors said.

Lenders will hold a bank meeting on Tuesday to discuss the new 60 million pound loan via existing lenders Golden Tree Asset Management and Avenue Capital.

The new loan will expire in six months. It will rank ahead of Travelodge's existing 325 million pounds of senior debt and would be repaid first in the case of insolvency.

The new 60 million pound loan replaces an emergency 10 million pound loan that matures at the end of February and will be used as working capital to keep the business running.

Golden Tree and Avenue may ask the senior lenders Royal Bank of Scotland Group, Investec, Barclays and Babson Capital Management to participate in the new loan, Travelodge said, after denying risk of bankruptcy on Monday.

Travelodge declined to comment further.