THE Royal Bank of Scotland has stepped in to lead the rescue of Four Seasons, the debt-laden nursing-home chain, after the group’s owner, the Qatar Investment Authority (QIA), abandoned salvage plans.

The QIA had hired Credit Suisse to negotiate a financial restructuring at the £1.3 billion business, but has been unable to agree terms with the debt holders and has now accepted that its £110m equity stake in the business is worthless.

The QIA is also believed to have approached Paul Taylor, its former investment partner, to step back in and help RBS work out a solution.

Taylor, through his vehicle Three Delta, bought the business nearly two years ago. He had been working on a rescue plan with RBS, but the QIA had rejected it and hired Credit Suisse to devise its own scheme. However, according to one executive at Four Seasons, the banks have since become “seriously annoyed” at QIA’s heavy-handed approach.

A multitude of new advisers are now representing different parties in the rescue. The management team at Four Seasons has hired Kroll, the insolvency specialist, and law firm Macfarlanes. The holders of high-yielding “Piks” - payments in kind - have hired investment bank Houlihan Lokey and lawyers Kirkland & Ellis.

RBS is one of the biggest holders of the senior debt. It also holds £90m of the £160m Piks issued. They initially yielded 22%, but it is thought that they now have no value. The new proposal involves RBS setting up a £800m loan facility and asking debt holders to convert a portion of their debt into equity.

If accepted, one solution being considered is to merge Four Seasons with the Priory, another health chain owned by the Edinburgh-based bank.

At the operational level Four Seasons is still producing earnings figures that are in line with its forecasts, but it is suffering from large interest payments on its debt.

The situation at Four Seasons is being mirrored elsewhere in the sector. HBOS and Calyon are in talks over a debt-for-equity swap at tour operator Travelsphere, for example.

The holiday company is owned by Cognetas, the private-equity group, which acquired it in a £144m deal in May 2006.

It has written down the value of its equity, about £40m, and sounded out potential buyers of the company. Those talks did not result in a deal and HBOS and Calyon are now poised to take over the business.

Travelsphere is profitable and there is no suggestion that the operating business is in trouble. One insider said it had “the wrong capital structure”. The most recent accounts show it has net debt of £116m.

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