Lehman set for £100m rescue of Meridien
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Your support makes all the difference.The stage was set last night for the break-up of Le Meridien after Lehman Brothers, the US investment bank, appeared to be inching towards a £100m deal to take control of the embattled hotel chain's 126 overseas sites.
The move followed weeks of speculation that a separate rescue package concocted by Guy Hand's investment vehicle, Terra Firma, and Prince Al Waleed, the Saudi billionaire, would salvage Le Meridien. It leaves the fate of the hotel chain's 11 UK sites, which are owned by Royal Bank of Scotland, hanging in the balance.
City sources said Lehman had struck a deal with Le Meridien's lending banks, led by CIBC and Merrill Lynch, which would see the US investment bank team up with Hyatt Hotels to inject £100m of equity into the struggling business. Hyatt would take over the management of the 126 properties while retaining the Le Meridien brand, sources said.
RBS, which bought the UK properties including the flagship Grosvenor and Waldorf hotels in a £1.25bn sale-and-leaseback agreement two years ago, is expected to bring in another hotel chain to manage the UK sites.
The US groups Marriott and Four Seasons and France's Accor are among the names in the frame to take over the management of the UK hotels, analysts said.
It was not clear if RBS, which leases the UK sites back to Le Meridien's management, plans to seek legal redress for any money it is owed - a move that would push the UK arm into administration. RBS is thought to have received rental payments up until 16 July.
One source close to the talks stressed that a final deal could still be "some days away". But yesterday's developments represent the first sign of progress after weeks of round-the-clock discussions.
Under the terms of Lehman's proposal, the US investment bank will also commit an extra £10m in working capital for the hotel chain, while the other creditors have agreed to stump up £40m. Le Meridien's 14 lending banks stand to lose up to £750m if no deal is finalised.
It is understood that Terra Firma's joint rescue package, which had secured RBS's backing, was dismissed on Monday night after Lehman refused to support it. That proposal would have seen Terra Firma and the Saudi prince inject equity of £150m in return for control of the group's management. It would have prevented the chain from being broken up and prolonged Guy Hands' involvement.
Mr Hands - then with Nomura, the Japanese investment bank - masterminded the original £1.9bn deal to acquire Le Meridien from Compass, the catering group, in 2001. The complexity of the deal he brokered, involving 14 investment banks, three private equity funds and one high street bank, has made the recent rescue talks "fiendishly complex", one banker said.
RBS, Lehman and Le Meridien all declined to comment.
The 126 hotels set to be acquired by Lehman and Hyatt include sites in more than 60 countries, from Senegal to Guyana.
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