The threat of administration hanging over Le Meridien Hotels receded last night amid indications that Lehman Brothers is ready to inject Pounds 150 million into the company as part of a rescue refinancing.

The Times has learnt that there is now broad agreement among financial institutions involved with the company that administration would be pursued only as a last resort. The Lehman proposal is now considered to be the favoured option, with one source saying: "Most recognise that administration is the nuclear option."

The immediate threat to the hotel operator's future should dissipate over the weekend when Royal Bank of Scotland (RBS) is expected to waive some or all of a quarterly Pounds 20 millionrentalpaymentdue on Monday. The payment relates to a sale-and-leaseback arrangement on 11 of the company's UK hotels, including the Grosvenor House and Waldorf hotels in London.

The Pounds 1.2 billion deal, under which Meridien sold the package of hotels to RBS and leased them back, was signed in May 2001 by Guy Hands, then of Nomura, to help to fund the Pounds 1.9 billion acquisition of the chain from Compass Group, the contract caterer.

Mr Hands, now of Terra Firma Capital Partners and co-chairman of Meridien, wants to renegotiate the terms of the lease to reflect the collapse of the hotel trade in the face of a cocktail of woes including the terror attacks of September 11, 2001, a global economic downturn, the Iraq war and Sars.

It is understood that RBS is keen to avoid administration and is minded to agree to a reduced rental level. There are suggestions that it is ready to accept just part of the Pounds 20 million due on Monday and to grant a period of grace of perhaps a month to allow a formal refinancing of all Meridien's liabilities.

Lehman, currently the chain's biggest mezzanine debt provider, would lead the proposed Pounds 150 million injection of cash into the business, with some of the hotel group's other creditors, which include Merrill Lynch and CIBC, contributing smaller amounts. In return, the banks would take full equity ownership of the hotel group.

Under the original acquisition in 2001, Nomura provided Pounds 227 million of equity, with a further Pounds 160 million of equity coming from Royal Bank Private Equity, Alchemy Partners and Abbey National. Jurgen Bartels, co-chairman with Mr Hands, invested Pounds 10 million of his own money. The original equity is now worthless. Most institutions involved have written off their investments.

Mr Hands, with Jon Moulton, of Alchemy Partners, has put forward an alternative to the Lehman proposal, involving the injection of Pounds 125 million of equity.

However, their insistence that the banks write off Pounds 1 billion of debt as part of a deal means it is unlikely to be favoured over the Lehman proposal.

Although none of the institutions involved would comment, a spokesman for the hotel company said last night: "Constructive discussions are continuing with all our stakeholders to achieve a new financial structure that will secure Le Meridien's future."

Meridien, originally part of Air France, has 137 hotels around the world, of which 40 are owned or leased, including the RBS properties. The rest are run under management contracts or franchise agreements, which some analysts say might be at risk if the chain were put into administration.

Last night, the hotelier announced winning a contract to operate the 107-room Givenchy Resort & Spa in Palm Springs, to be rebranded as Le Meridien Palm Springs.