May 19--Meridien, the international luxury hotel chain sold to Nomura for UKpound 1.9 billion last year, has been thrown a lifeline by its bankers after business slumped in the wake of the terror attacks on the US. 

Filings at Companies House show that "during the period January to April this year the financial covenants [on the company's UKpound 1.12 billion of loans] were renegotiated for the period to 31 December 2002". In the wake of the 11 September attacks, the company feared it could breach its loan covenants. However, despite a significant decline in business, Meridien kept to its original agreements. 

Most hotel groups had to talk to their bankers at the end of last year, over concerns that they may breach their loan covenants. 

Meridien was the last major purchase made by Guy Hands in his role as chief executive of Nomura Principal Finance. Hands made an estimated UKpound 150 million fortune through sophisticated financial engineering, including innovative use of securitisation. 

With Meridien, Nomura plans to sell off the property and turn the business into a pure hotel management operation. The Japanese bank's purchase of the chain was partly financed by a UKpound 1.25 billion sale- and-leaseback agreement on the UK hotels (which include the Grosvenor House and the Waldorf) with the Royal Bank of Scotland. 

Under the agreement, Meridien agreed either to pay 25 percent of its revenues, or UKpound 50 million a year in rent for the 30-year leases, whichever is greater. The collapse in travel led to Meridien paying more than a third of its revenues to Royal Bank. 

In March Meridien had to scale back plans to raise an additional UKpound 1.25 billion through a series of sale-and-leaseback agreements on its continental European hotels, which include the Ritz in Madrid and the Eden in Rome. 

The company now expects to raise about UKpound 750 million over the next two years through sale and leasebacks of its property. 

Company sources say Meridien should return to operating profit in the second quarter of this financial year. 

Prices of hotel rooms which, at the end of last year, had slipped by 40 percent, have now almost recovered, with occupancy rates close to 80 percent . 

Following the purchase Hands left to establish his own private-equity group, Terra Firma Capital, which is currently raising a E3 billion (UKpound 1.9 billion) buyout fund. 

The new fund is expected to have its first closing this summer. Hands declined to comment on the new covenants or the performance of the hotel business. 

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