Menzies Hotels, backed by Iranian tycoon Robert Tchenguiz, has been forced into expensive renegotiations over its huge debt pile after the hotel chain breached its banking covenants.

It is yet another blow to Tchenguiz, who has seen his business empire and personal investments take a hammering since the onset of the credit crunch.

The 17-hotel Menzies chain is another in a growing list of property-backed deals backed by HBOS, now one half of Lloyds Banking Group, that has run into difficulties.

Tchenguiz’s investment vehicle R20 bought Menzies at the end of 2006 for £180m, which included a debt package of £225m supplied solely by HBOS. It is understood that Menzies will have to supply a new business plan and budget to HBOS in the coming weeks in return for a new set of financing terms for the business.

The Sunday Times