Meridien rescue mission

Bankers to the troubled Le Meridien hotel chain were last night trying desperately to keep prestigious hotels such as the Waldorf and Grosvenor out of the hands of the administrators.

The 14 banks - led by CIBC of Canada, Deutsche Bank and Merrill Lynch - are owed £700m and are expected to spend the weekend trying to thrash out an agreement ahead of a £20m rent payment which is due on Monday.

They allowed their deadline of yesterday for reaching a refinancing agreement to be breached while the talks continued.

Lehman Brothers of the US is trying to persuade its fellow lenders to accept a proposal for a lifeline to the business.

A deal is in Lehman's interest because it is owed about £230m. Because it is not one of the main lenders, it is behind the 14 banks in the queue of creditors.

The rental payment is owed to Royal Bank of Scotland, which owns a dozen of the Meridien hotels after a sale and leaseback arrangement with the then owner of the chain, Guy Hands. Mr Hands, who shot to prominence for his deals at Japanese bank Nomura, now runs his own firm, Terra Firma, which has written off its £213m exposure.

His proposal to rescue the chain appears to have been rejected on the grounds that it would require the banks to write off a large part of their debt.

Instead, the banks are trying to reach agreement with Lehman, which is prepared to inject about £150m of cash into the business and allow the main lending banks to take control.

None of the parties involved in the crucial talks would reveal any details of the negotiations last night.

It seems likely that Mr Hands will have little further involvement in the group he bought from Compass two years ago for almost £2bn. It is his first big loss since leaving Nomura but it is understood that his Terra Firma funds are down only 2% because other business ventures are performing better.