• Monday, 22 July 2019

Leela promoters curious over 'sale' of hotel group


Feb 15, 2019 (5 months ago) |
New Delhi, Feb 14 : In a curious tale of a transaction taking place without the owner's knowledge, embattled Hotel Leela Ventures Company Secretary Alen Fernes wrote to both NSE and BSE surveillance departments on February 12 saying "We wish to clarify that the company in consultation with lenders is evaluating various options and there is no binding contract with any investor as on date either for investment in the company or for sale of company's assets.
Are Brookfield and JM Financial then trying to hoodwink shareholders and lenders by running canards in media?

The story, in circulation since September last, has not ended as it awaits the nod from one of the lenders. Two other suitors are also in the race, but they have been shut out because of payment of exorbitant minimum guarantees.

In parallel, JM ARC has moved National Company Law Tribunal (NCLT) in the matter initiating bankruptcy proceedings against the hospitality major.

The dispute over the Mumbai property remains as AAI has unilaterally terminated the lease of 18,000 sq mts of land on which the Mumbai hotel is built and have commenced eviction proceedings. Based on legal advice, Leela contemplates legally challenging it.

Brookfield and JM claim that they will carve Leela into a new company without the Mumbai property as part of the deal. JM holds 26 per cent in the company, controlling 96 per cent of the total debt of Rs 6,164 crore, while the Nair brothers, Deepak and Vivek, control 47 per cent of the shareholding with as much as 96 per cent of their shares already pledged to lenders. ITC, which also has a large hospitality business, owns 7 per cent.

Leela's losses are mounting, up from Rs 7 crore to Rs 89 crore for the nine months period of 2018-19 for the corresponding period over the previous year.

This comes against a backdrop of a series of stories appearing in media on how Canadian company Brookfield Asset Management is set to carve Leela into a new company.

On February 12, at the Leela board meeting which approved the unaudited financial results for the third quarter, the company reiterated that the erstwhile CDR lenders with exposure of 95.6 per cent of the CDR debt assigned their debt to JM Financial Asset Reconstruction Co and one lender with exposure to one percent of the CDR debt to Phoenix ARC Pvt Ltd on June 30, 2014.

The company has been evaluating various options for a viable resolution, including sale/monetisation of core assets, sale of hotels, equity infusion etc.

Moreover, the independent auditor's review report on standalone unaudited financial results by N.S. Shetty iamp; Co Chartered Accountants throws into stark relief certain inaccuracies in the results. For instance, Note 7 to the statement is about non-provision of interest for the quarter Rs 22,331 lakh, and till December 2018, Rs 368,011 lakh payable to ARCs.

If interest provision was made in accordance with the intimation received from the ARCs, the finance cost and the loss for the quarter and the nine months ended would have been higher by Rs 22,331 lakh and Rs 64,866 lakh respectively.

After redflagging this, it highlights in Note No 8 to the statement, regarding non provision of rent and minimum guarantees claimed by the Airport Authority of India amounting to Rs 31,119 lakh up to July 31, 2017 in respect of lease of 11,000 sq mts of land in Mumbai.

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Leela promoters curious over 'sale' of hotel group

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