Alwaleed to buy more than 50% of Le Meridien

Prince Alwaleed bin Talal, dubbed the wealthiest man outside the United States by Forbes magazine and worth an estimated $20 billion, has designated $1 billion to buy more than 50% of the ailing Le Meridien hotel chain.

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By  Massoud Derhally Published  July 10, 2003

Prince Alwaleed bin Talal, dubbed the wealthiest man outside the United States by Forbes magazine and worth an estimated $20 billion, has designated $1 billion to buy more than 50% of the ailing Le Meridien hotel chain.

In an interview with Asharq Al Awsat, Alwaleed said his turnaround strategy consisted of three stages: reducing the group’s loans, selling off non strategic real estate assets of the hotel chain and entering into strategic alliances and mergers while preserving the integrity of the brand name of Le Meridien.

“The decision to pick Le Meridien was because this is considered an investment opportunity and that is because of a number of reasons: this company which is suffering financially has a strong and vibrant brand name, and there is still the opportunity to recuperate its investment potential, and Le Meridien is need of capital and expertise that will take it out of the crisis,” Alwaleed told the paper.

The negotiations began a month ago when Guy Hands who represents the biggest stakeholder in the hotel chain, Tera Firma, contacted Prince Alwaleed’s Kingdom Holding Company.

In what seems to have been a leak to the press in early July, there was talk of an initial US $208 million infusion into the chain.

But a person close to the negotiations had told Arabian Business (July 8), “It’s a very difficult transaction to do,” adding, “I’m not sure what $208 million will do because you have a lot of debt. The money has to be in the context of real restructuring, you have to restructure the balance sheet.”

[Japanese investment bank] Nomura bought this thing highly leveraged, with very little equity and it’s not the best time for hotels with terrorism and the economy. When you have a highly leveraged capital structure at times like this you can expect some issues.”

The hotel chain missed a £20 million ($33.3 million) payment that was due to the Royal Bank of Scotland (RBS) last week. The bank allegedly threatened to sell off 11 hotels it owned in the UK to another chain, according to news reports. Le Meridien, which has 135 hotels in 56 countries, and an estimated debt of £1.9 billion, needs a capital injection of $160 million to try and turn things around.

The source added that various parties have different degrees of interest in the hotel chain and there are different kinds of debt owed to different investors. Investment bank Lehman Brothers is the lead creditor while rival Merrill Lynch also has a stake in the hotel group. Other investors include Alchemy Partners and Terra Firma.

Prince Alwaleed has a 24% stake in the Four Seasons hotels, owns the George V hotel in Paris, and has over $1 billion in real estate investments.

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