US investment bank Lehman Brothers is poised to take control of stricken hotel chain Le Meridien.
Lehman has emerged as the frontrunner after the chain's banks last week threatened to pull the plug if a rescue plan was not agreed by Friday. Talks have continued over the weekend, however, ahead of tomorrow's crunch rent payment of £20m to Royal Bank of Scotland, which owns the freeholds of 12 of Le Meridien's UK hotels, includ- ing the Grosvenor House and Waldorf. Le Meridien, currently managed by financier Guy Hands' Terra Firma fund, cannot afford to pay.
Lehman holds £160m in mezzanine (high-risk) debt and is offering to inject up to £150m into the business. A source close to the talks is confident a deal will be struck.
Lehman had originally proposed injecting £60m if the chain was put into administration. Royal Bank of Scotland would then have taken control of the UK hotels and Lehman the remaining sites.
But this was rejected by the consortium of around 20 banks that are understood to want to keep the chain together. Le Meridien has 135 hotels in 56 countries.
Lehman had been in talks with US private equity house Blackstone, the owner of Savoy Group, about buying Le Meridien's continental European hotels. But Blackstone has since backed out of the discussions.
Terra Firma and Alchemy have put together an alternative proposal, which involves the financiers putting in £100m and £30m respectively. In return, some of the lenders would make sacrifices, including allowing the mezzanine debt to be written off.
As the holder of the higher- risk debt, Lehman stands to be one of the biggest losers should Le Meridien go under.
Equity investors Nomura, Abbey National and Alchemy have already written off the value of their stakes. Nomura was the biggest investor with a £213m holding.Reuse content