Le Méridien has confirmed it is in talks with its banks and financial backers following intense speculation over the past few days about the state of its finances.

In a statement, the chain, which has 137 hotels in 56 countries, including London’s Waldorf Hotel and Grosvenor House, said it was in "constructive discussions".

It added: "Presentation of a revised business plan has been well received by stakeholders, and discussions will now focus on putting in place an appropriate and sustainable financial structure that will match the needs of the business and support its strategy and earnings potential over the longer term."

Reports have focused on chief executive Stephen Alexander overseeing a "hit squad" to come up with a survival plan for the chain, which has been struggling to keep up payments on debts of £1b.

Other reports suggest Guy Hands, the millionaire financier who led a £1.9b buyout of the chain in May 2001, is considering injecting £100m.

Le Méridien admitted it had been "adversely affected" by the war in Iraq and the Sars outbreak but added: "The majority of its hotels are maintaining or improving market share, with particularly strong performances from the Grosvenor House in London and Le Méridien hotels in Frankfurt, Amsterdam and Cairo."

Alexander and his management team were now "focusing on driving performance and managing costs, enabling the company to continue to deliver positive operational cashflow", the chain said.

A source close to the discussions indicated suggestions that rival hotel chains such as Hilton or Accor might step in to take over management contracts for the chain were, as yet, wide of the mark.

"We have got a lot of assets that people want, but that is all paper talk at the moment," said the source.

In the City, the view was that, whatever the outcome, the banks, led by Nomura, Abbey National and Royal Bank of Scotland, were just keen to see cash invested in the chain, as they were carrying the £1b debt.

"I don’t think they’ll want to foreclose on the debts, but they do want someone to put in some equity," said one analyst.

Le Méridien has confirmed it is in talks with its banks and financial backers following intense speculation over the past few days about the state of its finances.

In a statement, the chain, which has 137 hotels in 56 countries, including London’s Waldorf Hotel and Grosvenor House, said it was in "constructive discussions".

It added: "Presentation of a revised business plan has been well received by stakeholders, and discussions will now focus on putting in place an appropriate and sustainable financial structure that will match the needs of the business and support its strategy and earnings potential over the longer term."

Reports have focused on chief executive Stephen Alexander overseeing a "hit squad" to come up with a survival plan for the chain, which has been struggling to keep up payments on debts of £1b.

Other reports suggest Guy Hands, the millionaire financier who led a £1.9b buyout of the chain in May 2001, is considering injecting £100m.

Le Méridien admitted it had been "adversely affected" by the war in Iraq and the Sars outbreak but added: "The majority of its hotels are maintaining or improving market share, with particularly strong performances from the Grosvenor House in London and Le Méridien hotels in Frankfurt, Amsterdam and Cairo."

Alexander and his management team were now "focusing on driving performance and managing costs, enabling the company to continue to deliver positive operational cashflow", the chain said.

A source close to the discussions indicated suggestions that rival hotel chains such as Hilton or Accor might step in to take over management contracts for the chain were, as yet, wide of the mark.

"We have got a lot of assets that people want, but that is all paper talk at the moment," said the source.

In the City, the view was that, whatever the outcome, the banks, led by Nomura, Abbey National and Royal Bank of Scotland, were just keen to see cash invested in the chain, as they were carrying the £1b debt.

"I don’t think they’ll want to foreclose on the debts, but they do want someone to put in some equity," said one analyst.