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Guy Hands makes final attempt to save Le Meridien deal

Guy Hands is making a last ditch attempt to keep Le Meridien from the clutches of bankruptcy as private equity backers write off their investments en masse.

Hands set up the £1.9bn buy-out deal for the luxury hotel chain as head of Nomura Holding's Principal Finance Group in 2001. The Meridien collapse comes awkwardly as Hands struggles to raise the debut $3.3bn buy-out fund for his spin-out Terra Firma.

Hands plans to ask cornerstone investor Nomura, Royal Bank of Scotland, Abbey National and private equity firm Alchemy Partners for as much as £400m to keep Le Meridien afloat, according to a report by Bloomberg.

But prospects for success look slim, according to Jon Moulton, founder of UK buy-out firm Alchemy. ‘No-one in their right mind will put more money into this without sorting out the existing financing structure first,' he told Bloomberg.

Nomura made an initial investment of £213m in the highly leveraged deal and the Royal Bank of Scotland is thought to have committed in the region of £100m. The hotel chain is now thought to be worth just £700m, compared with debts of £1bn. Hands' firm Terra Firma still manages the chain.

The Meridien deal was sealed just months before the 11 September attacks which severely reduced demand for hotel accommodation. More recent global uncertainty, including the outbreak of SARS, have further soured the situation.

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