Le Meridien Fate: Five Days And ‘Counting’

LONDON— Financial institutions here are allowing bidders five days to make offers for luxury hotel chain Le Meridien, or they have said they will put the debt-laden chain into administration. According to reports in the British press, Terra Firma, the private-equity vehicle headed by Guy Hands and Alchemy Partners, reportedly has proposed to infuse £120 million ($199.6 million) into Le Meridien, but the 14-member bank syndicate is being asked to write off too much of the £740 million ($1.23 billion) it is owed. Another offer from Lehman Brothers and Blackstone to buy the European hotels attracted little support. Meridien’s cash crisis comes to a head next Monday when it has to meet a a £20 million ($33.3 million) quarterly rental payment to Royal Bank of Scotland, which owns a portfolio of its top hotels. These include the Grosvenor House and the Waldorf. There are concerns the payment will not be met. If the hotel group is put into administration, RBS is expected to bring in new operators to run them. Bank creditors, which include CIBC and Merrill Lynch, reportedly are considering a number of options. Reports said these include: * Renegotiating lease payments with RBS, which bought the hotels in a sale-and-leaseback transaction in 2001; * Accepting new equity from Terra Firma and Alchemy, the current equity holders, in exchange for reducing the £1 billion ($1.66 billion) the banks are owed; * Accepting an alternative offer from Lehman Brothers and Blackstone Group for the international hotels not owned by RBS; * Putting the company into administration and not paying the rent. An earlier offer from Terra Firma and Alchemy, which the banks rejected, would have seen them inject £125 million ($208 million) of new equity in exchange for a reduction of debt. The equity holders and banks failed to reach agreement on the size of the debt reduction. Lehman Brothers would also like a deal with the senior lenders. It is the biggest holder of Le Meridiens mezzanine debt, which is likely to be wiped out in any restructuring. Blackstone owns the Savoy Group of hotels here and has an eye on Meridiens international hotels, according to the reports. If put into administration, Le Meridien would avoid the rental payment but face the risk that RBS would assume ownership of the hotels and find another hotel group to run them. RBS, which owns 12 of the hotels, is said to be considering its own restructuring plan. SOURCES: The Sunday Times, The Financial Times