In its bid to come out from deep economic morass, the hospitality group, Leelaventure Limited intends to borrow Rs 2000 cr from a globally renowned takeover firm – Kolberg Kravis Roberts and Co. Reeling through a worst fall in its revenue, the group took the loan against its two prime properties; Chennai and Delhi, an informed source revealed. 

 

In its turn, the KKR is looking forward to expand its business activities in India and this proposal has defacto paved a red carpet for this equity firm.

The hospitality group suffered worst economic setback post 2008 slowdown when its restructuring plan falls into limbo and pushed it into the debt of Rs 4,700 cr. This necessitated bailout package the company bitterly needed to go ahead with its restructuring plan.

 

The group is jointly owned by Captain CP Krishnan Nair and ITCBSE and suffered setback due to the policy paralysis and indecisiveness of the government.This led to decline in revenue growth that further resulted into fall in room occupancy and room rate as well. The deal, if achieved, would be beneficial for the private equity firm.

Sanjay Nayar, KKR’s India head, was unreachable for his comment.

The hospitality group was under intense pressure as in June 2012, the lenders led by State Bank of IndiaBSE had agreed to restructure a total of Rs 4,700 croreloan outstanding with HotelLeela. If it fails to bring in Rs 2,000-crore capital by March end, banks would be forced to treat the loan as a non-performing asset, forcing them to set aside more funds.

 

In order to rejuvenate its financial condition the group has decided to mortgage its assets in Chennai and Delhi for the loan transaction. At 17% interest rate, the term for Rs 2000 cr loan extends to two years.The funds from KKR will be paid to the banks while Leela will get two more years to set its office in order.

The Company has failed to draw offers for some of its properties.

 

Leela possesses eight hotels in India with 2,211 rooms. In 2012-13 it incurred a loss of Rs 433.4 crore. Its operating revenue rose 14% to Rs 653.8 crore in 2012-13. The hospitality group sold its IT Park in Chennai for Rs 170 crore to Reliance IndustriesBSE 2.85 % Ltd in February 2013. 

 

Earlier, in August 2011, it sold Leela Resorts, in Kovalam (Kerala) to Ravi Pillai for Rs 500 crore even as it continues to manage it for the NRI industrialist.