LE MERIDIEN, the group which bought the Royal York Hotel two years ago, is this week fighting for its life.

The organisation, which also owns London's Grosvenor House and Waldorf Hotels, is battling to stave off calling in the administrators.

Crunch time for Le Meridien, which has been propped up by its banks since earlier this year, will be next Monday, when a £20 million quarterly rental payment is due to the Royal Bank of Scotland.

If Le Meridien's creditors are not happy with a rescue plan they have asked the group to formulate, they could trigger administration and sale of the assets of Le Meridien, some of whose hotels have been affected by the collapse in global tourism.

Talks are taking place between group representatives and a 17-strong consortium, led by financiers Merrill Lynch. Also involved in discussions is Guy Hands, who led the £1.9 billion buyout of the chain from Compass, including the Royal York - now Meridien York - two years ago.

But a spokesman for Finsbury, the London-based communications adviser for Le Meridien, said today: "We are hopeful that an agreement can be reached. Senior lenders understand that the basics of success are there and business is poised to improve the moment that the hotel industry picks up. And they understand that it is in their interests to keep the group together."

Marco Frik, general manager of Meridien York, said two months ago he had told his staff of nearly 100 that they would not be affected.

"At that time I advised them not to look at news stories of financial difficulties. It was just purely speculation," he said.

He said in York his bed occupation rates were high. "York is not London and we have a strong leisure market with a big appeal to the UK customer. My trading is good."

Since last September, when he arrived, Le Meridien had spent £1.2 million on the refurbishment of 65 of the hotel's 165 bedrooms, along with improved lifts and public areas.

His predecessor, Dustie Binns, had presided over £4 million-worth of investment there.

Updated: 14:20 Monday, June 23, 2003