The threat of administration hangs over the Shelbourne, one of Dublin's most prestigious hotels, as the deadline looms on a €28 million rental payment owed by its parent group.
Bank creditors are considering putting the Le Meridien chain into administration to prevent Royal Bank of Scotland (RBS) recovering rent on 12 hotels, including the Shelbourne, which it acquired in a €1.7 billion sale and lease-back arrangement in 2001.
With the rent due on Monday next, the Shelbourne, conservatively valued at €100 million, could find itself in administration as early as the weekend, Le Meridien spokesman Mr Robin Walker told The Irish Times.
Other options under consideration by creditors, which include CIBC and Merrill Lynch, are renegotiating lease payments with RBS, or accepting fresh equity from Terra Firma and Alchemy, the current equity holders, in exchange for reducing the €2 billion the banks are owed. The banks may also accept an alternative offer from Lehman Brothers and Blackstone Group for the international hotels not owned by RBS.
The creditors are understood to favour negotiating an agreement with Alchemy and Terra Firma, run by Mr Guy Hands. He led the highly leveraged €2.7 billion buyout of Le Meridien in 2001 when he worked for Nomura Principal Finance Group.
A previous offer from Terra Firma and Alchemy, which the banks rejected, would have seen them inject €180 million of new equity in exchange for a reduction of debt. The equity holders and banks were unable 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 Meridien's mezzanine debt - likely to be wiped out in any restructuring.
Blackstone owns the Savoy Group of hotels in London and is understood to have an eye on Meridien's international hotels.
The banks favour renegotiating the group's lease with RBS, which was agreed in 2001, before the September 11th attacks in the US and the subsequent downturn in global tourism.
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. In addition to owning the Shelbourne, Meridien manages Bewley's Hotel at Newlands Cross, Dublin.
Uncertainty over the Shelbourne's future follows recent upheavals in the hotel industry. Earlier this month, Choice Hotels Ireland acquired the Ryan Hotel Group from the Gresham Group for €35 million.
Galway Ryan fetched 11 million, Limerick Ryan €10 million and Killarney Ryan 14 million. Their net book value at the end of last year was €34.64 million.
