Seeking ‘Princely’ Sum For Le Méridien

LONDON— The Saudi billionaire and hotel investor Prince Alwaleed bin Talal, reportedly has been approached by shareholders of financially troubled Le Méridien Hotels and Resorts seeking to inject new capital into the international hotel chain. According to reports in the British press current investors, including Alchemy Partners headed by Jon Moulton and Terra Firma, Guy Hands’ private equity vehicle, contacted the prince’s advisers and investment vehicle, Kingdom Holdings, as doubts were expressed over a rescue package being cobbled by investment bank Lehman Brothers, the largest holder of mezzanine debt in Le Méridien. Lehman Brothers reportedly is is trying to put together a £150 million ($250.1 million) rescue package. The hotel chain held off administration last week when Lehman and a consortium of banks made a rental payment of £4 million ($6.6 million) against £20 million ($33.3 million) to Royal Bank of Scotland (RBS), the group’s largest landlord in the U.K. Lehman and the 14-member bank syndicate, which is owed £740 million ($1.2 billion), agreed to pay £2 million ($3.3 million) each to RBS. Lehman and the banks now have until July 16 to pay the balance. The group, which is led by Merrill Lynch and CIBC, have also provided a £25 million ($41.6 million) working-capital facility. Reports indicate discussions with the prince are seen as a contingency move in case the Lehman route fails. According to The Times, if the prince decides to provide additional equity, it will be alongside Terra Firma, Alchemy Partners; and two minority shareholders, RBS and Abbey National. They are seeking to raise at least £120 million ($199.6 million). If Lehman’s rescue plan fails, it faces writing off up to £240 million ($399.2 million) of mezzanine finance it provided when Nomura bought the hotel group two years ago. Nomura has since written off its equity investment; its position has been taken over by Terra Firma. The report said RBS has made it clear that, unless the rent is paid in full, it will bring in an outside operator to run the 11 hotels it owns. Hands reportedly has told Le Méridien’s banks that if they accept his proposal they will have to write off part of the £740 million ($1.2 billion) they are owed. Some banks are resisting this, but Hands believes his proposal preserves value for all stakeholders, ensures the business is not broken up, and safeguards the brand, said The Times. Prince Alwaleed operates from a desert camp 40 miles north of Riyadh and has stakes in Citigroup, EuroDisney and Canary Wharf, and the George V in Paris, among other interests. He owns a 24% stake in Four Seasons, and 5% of Fairmont Hotels of Toronto. Le Méridien’s portfolio includes 135 hotels in 56 countries. SOURCES: The Sunday Times, The Times