Travelodge has put forward a company voluntary arrangement (CVA) bid to landlords, seeking a 38% reduction in its total rent bill to the end of 2021.
Rent payments are the budget hotel chain's largest cost, equating to £215m a year and paid to around 300 individual landlords.
Travelodge's CVA proposal is to pay landlords a total of £230m, approximately 62% of rent due, between April 2020 and the end of 2021.
Full rent will be paid for 77 hotels, with 94% of leases being paid at least half of rent due. However, no rent will be paid in relation to 6% of properties that had already been loss-making, although payments will cover fixed charges.
Landlords will be offered the opportunity to offset losses through lease extensions, and those that forgo a portion of rent will also receive additional cash payments equating to a 50% share of the group's cumulative, adjusted earnings before interest, taxes, depreciation, and amortisation generated in the next three years in excess of £200m.
No proposed closures or permanent rent reductions are proposed, with Travelodge saying the temporary action is the best way to "preserve the company's liquidity position". If approved, it will form a "critical component" of its recovery plan to address short-term challenges and secure the future of its 10,000 employees.
Travelodge has said it entered 2020 with a record level of cash reserves, however the Covid-19 pandemic has led to a predicted fall in revenue this year of £350m, with the impact expected to continue into 2021.
Its CVA package will also see shareholders put forward a £240m support package comprising the use of more than £100m in reserves, taking on £100m in extra debt and putting in up to £40m in new equity. The CVA will not affect employees or supplier payments.
Travelodge has been in the midst of fierce negotiations with landlords for some weeks, with some threatening legal action or evictions in a bid to secure rental payments.
The CVA will require the approval of 75% of creditors, with a vote planned for 19 June.