Source - RNS
RNS Number : 5526Q
Secure Income REIT PLC
19 June 2020

19 June 2020

Secure Income REIT Plc

("SIR", "the Company")


Result of Travelodge Hotels Limited CVA vote and further update on other tenant agreements





Travelodge Hotels Limited ("Travelodge") has announced that the Company Voluntary Arrangement ("CVA") proposals, presented to its creditors on 3 June 2020 as modified on 16 June 2020 and clarified on 17 and 18 June 2020, have been passed by the required majority of creditors and approved by its shareholder.  There is now a 28 day period from the date that the meeting results are filed at Court and expiring on 16 July 2020 at the earliest, during which the outcome may be challenged through the Courts by any creditor of Travelodge who was entitled to vote in the meeting.


Should the CVA result still stand at the end of the challenge period, the estimated impact on SIR is as set out in the Company's announcement of 4 June 2020.  The cash flow impact of the proposals has not changed since the launch of the CVA on 3 June, but negotiations with Travelodge since then have yielded additional benefits and protections for landlords which culminated in the modified CVA proposal announced by Travelodge on 16 June 2020 and the further clarifications on 17 June 2020.  These include: more robust operation of the landlord only break rights; improved certainty that the shareholder funding will be provided and not withdrawn; and an enhanced share of future above threshold profits, should those profits targets be met by Travelodge, potentially available to landlords who do not exercise their  break options. 


Assuming that there is no successful challenge to the CVA result which might result in changes to the CVA proposal or to the failure of the CVA overall, and assuming that SIR does not exercise any of its break rights, the impact is expected to be:

· a reduction in the Group's minimum contracted rent (ignoring any potential RPI or open market uplifts) of £14.4 million (12.9% of SIR's total annual rent) in the year ending 31 December 2020;

· a reduction in the Group's minimum contracted rent (ignoring any potential RPI or open market uplifts) of £8.6 million (7.6% of SIR's total annual rent) in the year ending 31 December 2021; and

· a return to the previously expected levels of contracted rental income from 1 January 2022 onwards.


119 of SIR's 123 Travelodge leases now include a landlord-only option to break the lease for no consideration payable.  For the majority of those leases, 114 of the 119, the break option may be exercised at any time before 19 November 2020 and for the remaining five leases the break option period runs to 31 December 2021

Those 119 leases, representing some 88% of the pre-concession hotel portfolio passing rents, also now include a landlord option to extend the existing Travelodge lease term, provided this option is exercised within the period to 28 August 2020.  If this extension option is exercised, the landlord break option referred to above falls away and the Weighted Average Unexpired Lease Term of the Company's entire 123 hotel Travelodge portfolio increases by 2.75 years.

The remaining four leases, accounting for some £3.7 million per annum of current passing rent, are not varied, and rents will continue to be paid in full. 


The Company and its advisers are in preliminary discussions with alternative hotel operators with a view to establishing the best options for maximising shareholder value. There is a variety of different lease and partnership models employed by investors and hotel operators and the Company is assessing the potential for any of these to add incremental value over and above the existing lease arrangement with Travelodge.


Other tenant agreements


Additionally, we reported on 23 April 2020 an agreement in principle with a tenant other than Travelodge to defer certain rents due in 2020 equal to 15.6% of 31 December 2019 passing rents, reducing cash receipts in 2020 and deferring receipt of that income to 2021.  This agreement, which has since been formally entered into, is not a reduction in contractual rent but a rescheduling of cash payments.  Certain other cash flow smoothing agreements have been entered into in order to support our tenants in the leisure and hospitality industry, none of which have a material impact on 2020 or 2021 rental receipts.


While we await further visibility on the prospects for recovery of the UK economy as it emerges from lockdown, we are pleased to see that the Travelodge process is now complete subject to any legal challenges arising in the challenge period.


The SIR business remains well capitalised, with a very significant liquidity buffer. The Board remains confident that it is invested in key operating properties with high barriers to entry in sectors with sound long term growth prospects. 


The Company will provide a further update to shareholders following the next rental due date which, for the majority of the portfolio, is 24 June.


Martin Moore, Chairman of Secure Income REIT, commented:

"The break clause optionality provided to us by the CVA agreement, in conjunction with Secure Income REIT's strong balance sheet and considerable liquidity, creates a solid position from which we can actively explore options for our hotels portfolio, whilst at the same time providing Travelodge with the breathing space it requires to re-establish its business."




For further information on the Company, please contact:


Secure Income REIT Plc

Nick Leslau

Mike Brown

Sandy Gumm


+44 20 7647 7647

[email protected]

Stifel Nicolaus Europe Limited

(Nominated Adviser)

Stewart Wallace


+44 20 7710 7600

[email protected]

FTI Consulting

(PR Adviser)

Dido Laurimore

Claire Turvey

Eve Kirmatzis 

+44 20 3727 1000

[email protected]







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