A reassuring message

Le Meridien hotel group’s financial woes have been well documented, but its CEO, Robert Riley, was keen to tell ITP.net that the company will come out of its problems intact.

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By  David Ingham Published  April 7, 2004

|~||~||~|Who currently owns the group and what are its prospects? In July 2001, Nomura purchased the company from Compass and I think everyone would say that they probably paid a full price and financed it in a highly leveraged way. Then the worst thing that could happen to the tourism industry happened, 9/11. The company entered 2003 with £2 billion of debt, a billion in loans to financial institutions and a billion in sales lease back obligations to the Royal Bank of Scotland. We got rid of 50% of our debt by transferring 11 properties [to Royal Bank of Scotland.] If you do the per room value, it was a good price. Then, towards the end of 2003, our other billion pounds in debt was consolidated when Lehman Brothers bought it. Lehman Brothers is one of the largest investors in hotels in the world, especially in America, and they’re a very strong partner to have. When Lehman Brothers bought our senior debt, it asked us to enter into an exclusive negotiating agreement with Starwood for two reasons. One, we wanted to see if Starwood was prepared to invest in our company and we also wanted to see if we could create value by aligning ourselves with Starwood. That exclusive negotiating arrangement is continuing; we’re not sure whether we’re going to conclude something with Starwood. For Starwood to come and invest in our company, they have to do it at the same level that Lehman Borthers did. There’s more discussion to go on concerning price and there’s more discussion to go on concerning the value that can be created through the shared services [and] through the Starwood affiliation. We’re optimistic we’re able to work something out with Starwood, but we think it will take a couple more months before we really know if we have a firm deal there. So, at the same time we’re developing a plan to go forward independently. In every case, whether it’s through an affiliation with Starwood or whether it’s independently, Meridien’s going to remain an independent company and Meridien’s going to remain an independent brand. You spoke of affiliation. What would that mean? We would be an independent brand that would affiliate with them. There’s a whole series of infrastructures there that we could plug into to help drive revenues though our properties and save costs. What is your message to the consumers of your services and the owners of your hotels here? I’ve just had a very nice meeting with His Highness [Sheikh Ahmed bin Saeed Al Maktoum] so I’ve delivered my message to the owner here. The message to give them is that we currently have 135 properties in 56 countries that are operating beautifully, we plan to open 19 hotels in the next three years, we’re a vibrant company with a great, distinguishable brand. We have a fully committed group of people in our corporate office that’s committed to supporting this extraordinary group of people in the field. Was Sheikh Ahmed worried? Not at all. He recognises, as most owners recognise and customers recognise, that the hotels have been operating fine. Our balance sheet issues have never diverted our folks from their mission, which is operating great hotels and delivering great services and great return for the owners. He’s fully supportive of us, he appreciated my coming, and I think he appreciated my enthusiasm and my commitment to taking Meriden to the next stage over the next 4-7 years. Did he say he would take the hotels away and create his own group? Absolutely not. In fact, we’re talking about building new hotels, adding to the portfolio. We have Kuwait in May and we’re planning at least two additional hotels here with His Highness. The relationship is strong, and the relationship is strong because the folks at the properties in the region have been doing a great job and have not been distracted by the balance sheet issues at corporate level.||**||

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