Travelodge - comment
The bonds will be softer on the downgrade to Caa1, but with a B- rating at S&P, forced selling will be limited. The rationale for the downgrade is the slow growth in RevPar in the UK and the relentless increases in taxes; Moody’s is particularly concerned about the Business Rate increases over the next three years. We expect some relief from the government here, so our net cost increase expectations will be slightly below Moody’s. The 2028 refinance will require some management of the upward-only rental reviews, but landlords will want to avoid tipping Travelodge into a restructure and prompting hotels to be handed back under a CVA.