Royal Bank of Scotland (RBS) is understood to be backing a revised rescue plan from Mr Guy Hands for Le Meridien, the hotel group that owns Dublin's landmark Shelbourne Hotel and is threatened with collapse.

The bank, which owns 11 of Le Meridien's hotels, is believed to have given support to a £150 million (€212 million) package put together by Terra Firma, the investment vehicle of private-equity financier Mr Hands and Saudi billionaire Prince Al Waleed. Acceptance of the proposal would be a crucial step in Meridien's rehabilitation.

However, any plan still needs the go-ahead from the group's 14 senior bank lenders, who are owed an estimated £750 million by the company.

Terra Firma, which is in competition with a rival bid from Lehman Brothers, failed to push through previous offers because the lenders felt they were financially unattractive. Nevertheless, it hopes that improved repayment terms will swing the deal in its favour.

Under the latest package, Prince Al Waleed would put in £120 million and Terra Firma most of the remaining £30 million. The banks would be paid 2½ percentage points above Libor - the benchmark for floating interest rates - which is higher than the previous offer. They would receive 10 per cent of the company but would not have to write down any debt.

Talks were continuing last night between the principal lenders, Merrill Lynch and CIBC, and all the other parties - Lehman Brothers, RBS and Mr Hands's consortium.

It is also necessary for Lehman to approve the latest plan. Talks are expected to continue today.

A Lehman insider said: "We are still discussing the situation with Royal Bank of Scotland."

Negotiations about a financial restructuring package were triggered earlier this year when Meridien missed a £100 million repayment deadline to its main lenders.

RBS acts as landlord for the hotels, which include the Waldorf and Grosvenor House, and which make up less than 10 per cent of Le Meridien's entire portfolio.

If agreement cannot be reached, there is a danger that it might put the company into administrative receivership.

It has already rejected a rival offer by Lehman Brothers, the largest holder of the company's mezzanine or second-tier debt, after the two parties failed to agree how the equity should be apportioned and the level of rent reduction that RBS would be prepared to accept.