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Leela Looking to Lighten Burden by Selling of Stake

Posted: Tuesday, 22 September 2015 17:26


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Leela Looking to Lighten Burden by Selling of Stake

Sep 22: With the galloping interest costs and a sluggish hotel industry, the debt-laden Leela group has decided to sell 24% of their stake after selling of the Goa property at US $111 million (Rs. 7.5 billion) to Malaysia-based conglomerate Met Tube Sdn Bhd recently by entering into a so-called business transfer agreement to sell

Vivek Nair, Chairman and MD of the luxury chain, has reportedly said, “We are talking to three to four international investors, who recognize our expertise in running hotels.” Leela will continue to operate the Leela Goa hotel under Leela brand for a management fee. The company owed over Rs. 5,000 Cr, according to the latest official balance sheet. He hopes to complete the deal before the targeted dated of April 2016.

 “We want to bring down the remaining Rs.4,500 Cr of debt through a combination of equity and debt in a manner that we don’t lose majority control of the company. We may sell at least a 24% stake to a financial investor,” Nair reportedly  said, adding its days of struggling and valuations are over and the investors need to be patient.

While there has been a continual speculation that the hotel is looking for buyers for its exclusive property in Delhi, it sold it Kovalam property in 2011 for Rs. 500 Cr (Rs. 5 billion). In 2013, it sold its IT Park Building in Chennai for  over Rs.170 Cr. to Reliance Industries .In March, the company had said it planned  to sell its hotels in Chennai and Goa. Son of Late Capt. Nair Vivek said that they were now trying to avoid further asset sales. According to the terms of its corporate debt restructuring, it must sell assets to reduce debt.

Leela now plans to sign contracts with other independent  hotel owners to operate their properties under the Leela brand, under the  management contracts.

The company’s debt rose after the global credit crisis of 2008, when it went on a rapid expansion plan by acquiring land across the country. After its 2008 expansion in Bangalore,  the company bought land in Chennai, Pune and Agra, mostly funded by debt and internal accruals, spending about Rs.3,000 Cr. After the financial crisis, the demand in the hospitality sector fell, while interest costs soared.

Nair said Hotel Leelaventure would reportedly have at least 14 hotels with over 2,200 rooms under management contract in the next one-two years, apart from five hotels of its own.

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