Secure Income REIT PLC Result of Travelodge CVA & further tenant update (5526Q)
20 June 2020 - 1:09AM
UK Regulatory
TIDMSIR
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
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withdrawn; and an enhanced share of future above threshold profits,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 GBP14.4 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 GBP8.6 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 GBP3.7 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."
ENDS
For further information on the Company, please contact:
Secure Income REIT Plc +44 20 7647 7647
Nick Leslau enquiries@SecureIncomeREIT.co.uk
Mike Brown
Sandy Gumm
Stifel Nicolaus Europe +44 20 7710 7600
Limited stifelsecureincomereit@stifel.com
(Nominated Adviser)
Stewart Wallace
FTI Consulting +44 20 3727 1000
(PR Adviser) SecureIncomeREIT@fticonsulting.com
Dido Laurimore
Claire Turvey
Eve Kirmatzis
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDGZGMVKLNGGZM
(END) Dow Jones Newswires
June 19, 2020 11:09 ET (15:09 GMT)
Secure Income Reit (LSE:SIR)
Historical Stock Chart
From Sep 2024 to Oct 2024
Secure Income Reit (LSE:SIR)
Historical Stock Chart
From Oct 2023 to Oct 2024