Lehman close to Meridien rescue

STARWOOD Hotels and Lehman Brothers are thought to be near to a £700m deal to rescue the troubled Le Meridien hotels business.

A move to refinance the group would follow months of wrangling as Lehman attempts to salvage some of the £200m it lent to Le Meridien before its near-collapse.

Lehman's talks with US-based Starwood were revealed by the London Evening Standard at the beginning of the month, and reports today suggest that the pair could be announcing a deal by the end of this week.

The transaction would rescue about 125 hotels around the world, most of which are run under management contracts. In London it will include the flagship Le Meridien Piccadilly and the Cafe Royal.

It would not include the 11 Meridien sites in the UK owned by Royal Bank of Scotland. Management contracts for these are being given out piecemeal by RBS. Hilton has already taken on the Waldorf on Aldwych while Marriott has has the contract for the Grosvenor House on Park Lane.

The Lehman-Starwood deal is expected to beat off a rival £700m bid from Goldman Sachs' investment arm, which would have effectively forced Lehman to write off its £200m of mezzanine debt.