Travelodge - comment

That the sale of 13 hotels would trigger a mandatory application towards the debt seems far-fetched. The terms for the sale of non-guarantor RG assets allow for "reinvestment" over one year and that includes ordinary CapEx and M&A, which we model as sufficient to cycle the cash through the business. That makes sense, as per our math, as Opco was going to run out of cash by early next year. We assume, therefore, that the NatWest February maturity at PropCo will have been dealt with at the same time, and that £85m is the gross consideration, which should push out the liquidity crunch by a few months. Also, the Q226 report showed £135.6m of property assets, so we assume there are further hotels remaining in the structure, which might provide for one more final injection. However, from our perspective, this transaction requires a bigger rethink: We had assumed GT would contribute its existing hotels as collateral into the RG and use them as bait for an uptier that would fix the balance sheet for good. There are two ways to read this transaction now: 1) it's sponsor support, where GT used liquidity from above the RG to extend the runway, or 2) the cash will leave RG within the next months again anyway (chiefly to GT-controlled entities outside the RG), so it only amounts to pulling assets out of the opco before hitting it even harder at a later date. Let us know how you think about it.