The Economic Times daily newspaper is available online now.

    Hotel Leelaventure looks to sell three hotels

    Synopsis

    The hotel chain, partly owned by ITC, is negotiating with Kingdom Holding Co (KHC) to raise Rs 3,000 crore by selling its Chennai, Goa and Delhi properties.

    ET Bureau
    Hotel Leelaventure, the operator of marquee hotels like Bengaluru's Leela Palace and Leela Goa, is in talks with billionaire Saudi Prince Alwaleed bin Talal to sell three of its prime properties. The hotel chain, partly owned by ITC, is negotiating with Saudi business magnate's investment firm Kingdom Holding Co (KHC) to raise Rs 3,000 crore by selling its Chennai, Goa and Delhi properties, said two people familiar with the talks.

    Mumbai-based Leelaventure has already missed the first deadline set for it to raise the funds by JM Financial Asset Reconstruction Company (ARC), which earlier this year acquired 97% of the hotel chain's debt from a consortium of lenders. If the promoters fail to bring in Rs 3,000 crore capital by December-end, the ARC plans to float a global tender for the sale of the properties, said one of the people.

    Vivek Nair, chairman and managing director of Leelaventure, denied any discussions with KHC, while a JM Financial ARC spokeswoman said it doesn't comment on speculation. KHC didn't respond to an email seeking comment. Talks have been ongoing for some time, said the sources.

    "The problem is that The Leela wants to retain management control while KHC is not willing to agree on that," said this person, on condition of anonymity. KHC is interested in a complete buyout of the three properties, he said.

    The hotel chain has been in the red for the past two years, owing to rising interest cost on its borrowings. While sales have grown by more than 25% over two years to Rs 718.5 crore in fiscal 2014, it has "made a total loss of Rs 880 crore in the past two years. In FY14, it paid Rs 502 crore in interest on an operating profit of Rs 145 crore, leading to a net loss of Rs 440 crore. This has raised questions over its ability to repay debt that totalled Rs 4,905 crore, almost six times equity, at the end of March 2014.

    About two years ago, its then Rs 4,700-crore loan was restructured and as per the terms, the hotel chain had to infuse Rs 2,000 crore in the company earlier this year. Initially, it had proposed to sell its Delhi and Chennai properties to raise funds. However, it was unable to sell them.

    Meanwhile, the company began negotiations with private-equity firms, high networth investors and sovereign wealth funds. Earlier this year, it initiated talks with buyout firm Kohlberg Kravis Roberts & Co, wherein the company would mortgage its properties in Delhi and Chennai to KKR against a loan of Rs 2,000 crore for two years at an interest rate of 18%. The talks were called off as both parties and lenders couldn't agree on the terms for a deal. It has sold some properties, such as an IT park in Chennai and the Leela Resorts hotel in Kovalam, Kerala.

    The Saudi billionaire's investments include companies like Citigroup, Apple, News Corp, Time Warner, Walt Disney Co and Twitter. His business intelligence and creative investments have earned him the nickname of "Arabian Warren Buffett" by several international publications.

    A deal with Leelaventure would widen his investment in the hospitality space, which already includes renowned brands like Four Seasons, Fairmont, Movenpick and Swissotel. The prince is the founder of KHC and has made landmark investments across sectors like real estate, financial services, technology, media, entertainment, retail, agriculture, petrochemicals and aviation.


    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    ...more

    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    ...more
    The Economic Times

    Stories you might be interested in