News has broken on a proposal for the recapitalisation of Le Meridien Hotels Group by Starwood Capital Group and Lehman Brothers, the holders of much of the Le Meridien’s debt. The details of the proposal are outlined below.- Affiliates of Lehman Brothers, the holder of much of the Group’s debt, and Starwood Capital Group Global LLC have advised the Group that they have entered into a non-binding letter of intent to form a joint venture and have proposed that the joint venture acquire the owned and leased hotel portfolio of Le Meridien (with the exception of the Forte Village in Sardinia which would be acquired by an affiliate of Lehman); and

- The Group has been advised that Starwood Hotels & Resorts Worldwide, Inc. has entered into a non-binding agreement with the Lehman/Starwood Capital joint venture and pursuant to that agreement Starwood Hotels has proposed to acquire the Le Meridien brand, management and franchise business from Le Meridien. Starwood Hotels would also enter into management agreements for the 36 owned and leased Le Meridien properties to be acquired by Lehman and Starwood Capital Group with such hotels continuing to be operated under their current flags.

These proposals will be presented to the Board of Le Meridien as part of a recapitalisation plan for the Group. Consummation of the transactions contemplated by these proposals would be subject to the execution of definitive agreements, regulatory approvals, confirmatory due diligence, consultation where appropriate with employee representatives, the agreement of other Le Meridien stakeholders and Board of Directors and other customary terms and conditions. Other terms of the proposals were not disclosed.
Robert Riley, CEO of Le Meridien commented: “If completed, these arrangements would at long last provide for the consensual recapitalisation of the Group. Le Meridien has a well-respected and unique identity with strong customer loyalty, and skilled, experienced and passionate employees. Its alignment with a robust multi-branded management company like Starwood Hotels should enable the Le Meridien brand and its hotels to thrive by enhancing revenue and accelerating growth. The joint venture with Lehman Brothers and Starwood Capital Group should provide a financially strong structure for the current owned and leased portfolio. Providing an independent ownership structure for the Forte Village should create new potential for this world famous property.”
The transactions and recapitalisation are anticipated to be completed in the third quarter of 2005. In the meantime, Le Meridien Hotels & Resorts will continue to be operated independently by current management.
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