/NOT FOR DISTRIBUTION ON U.S. WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
HALIFAX, April 1, 2015 /CNW/ - Holloway Lodging Corporation (TSX: HLC, HLC.DB, HLC.DB.A) ("Holloway") is pleased to announce that it has sold its Travelodge® franchise business.
Holloway acquired the franchise business through its acquisition of Royal Host Inc. in July 2014 and determined that the franchise business was not a core asset for Holloway. Holloway sold the franchise business for $21.0 million which is significantly more than the value underwritten by Holloway at the time of the acquisition of Royal Host. Holloway estimates that it will record a gain on sale of approximately $6.4 million or $0.33 per share in the first quarter of 2015 and does not anticipate paying any tax on the sale of this business.
The purchase price for the franchise business was satisfied through a cash payment of $16.0 million and the issuance of $5.0 million of subordinated secured notes. The notes are fully amortizing over their life and are secured by 75% of the current and future receivables of two hotel franchise businesses with a combined 221 franchised hotels. Holloway expects these notes to be outstanding for a short period of time only.
Holloway intends to deploy the cash portion of the sale proceeds to repay in full its $16.0mn term loan originally used to finance the acquisition of Royal Host.
Michael Rapps, Chairman of Holloway, stated "While the franchise business was a solid asset within Holloway's portfolio, it was not a core asset for us. The sale of this business will allow management to focus on our core business of owning and operating hotels. In addition, we believe many investors overlooked our ownership of this business and the sale of this business should unlock value for our shareholders."
Mr. Rapps added "We would like to thank all of our franchise business employees for their dedication and contributions to this business over the years. Holloway is currently the largest Travelodge® franchisee in Canada and remains committed to the brand, which continues to deliver value to our guests and shareholders."
ABOUT HOLLOWAY LODGING CORPORATION
Holloway is a real estate corporation focused on owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets. Holloway owns 35 hotels with 3,967 rooms. Holloway's shares and debentures trade on the TSX under the symbols HLC, HLC.DB and HLC.DB.A.
This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to Holloway's future outlook and anticipated events or results and may include statements regarding Holloway's future financial position, business strategy, financial results, plans and objectives. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what Holloway currently expects and there can be no assurance that such statements will prove to be accurate. Some of these risks and uncertainties are described under "Risk Factors" in Holloway's annual information form for the year ended December 31, 2014 which is available on Holloway's profile on the SEDAR website at www.sedar.com. Holloway does not intend to update or revise any such forward-looking information should its assumptions and estimates change.
SOURCE Holloway Lodging Corporation
For further information: Michael Rapps, Chairman, at (416) 855-1925 or Jane Rafuse, Chief Financial Officer, at (902) 443-5101