Hotel Leelaventure To Sell Five Properties To Brookfield For Rs 3,950 Crore

Thirty three years ago Hotel Leelaventure Ltd. opened its first hotel in Mumbai. Now that's all the insolvent company will be left with after it completes the sale of prime properties to Brookfield Asset Management.

The company will sell four Leela hotels in Bengaluru, Chennai, Delhi and Udaipur to a Brookfield-sponsored private real estate fund, according to a stock exchange filing. The deal includes another property it owns in Agra. The transaction also includes all assets and liabilities related to the properties, and all hotel management contracts currently in operation as well as contracts for hotels currently under development.

All intellectual property owned by the company is part of the deal and intellectual property owned by promoters will also be sold to Brookfield for Rs 150 crore. The transaction includes agreements between Brookfield and the promoters for carrying out certain development activities and provision of business expansion services.

As for the Mumbai hotel - the company will sign a licence agreement and centralised services agreement with Brookfield.

The total transaction value is Rs 3,950 crore along with applicable costs, the statement said.

Hotel Leela said the proceeds from the slump sale of assets will help repay borrowings from banks and financial institutions. The company's debt, according to its annual report for 2017-18, stood at nearly Rs 3,800 crore. The deal is expected to be completed in three to six months, subject to shareholder and regulatory approvals.

The promoters of Hotel Leela have signed voting and exclusivity agreements with Brookfield, that cover potential competing offers, said the company statement to the stock exchange, without offering further details.

Since this is a slump sale of assets the shareholding of Hotel Leela will remain unaffected, the statement said.

It is a step in the right direction for Leela, said market expert Deven Choksey.

Hotel Leelaventure runs a chain of hotels and resorts, with nine properties it owns or manages across India. The company had restructured debt under the Corporate Debt Restructuring mechanism in September 2012. In June 2014, its erstwhile lenders, with over 95 percent of the hotel operator's debt, assigned their debt to JM Financial Asset Reconstruction Company, and one lender with exposure of about 1 percent.

Last month, JM Financial filed an insolvency petition against Hotel Leelaventure with the Mumbai bench of the National Company Law Tribunal. Hotel Leela had been looking at various options to repay debt including sale of non-core assets, hotels, equity infusion and even debt refinancing.

JM Financial will act as an exclusive financial adviser to the deal will Brookfield, the statement said.

It is a significant part of its business that Hotel Leela is letting go of. In 2017-18, the four hotels it is selling contributed nearly 80 percent of its total income. The hotels—which also include the luxurious Leela Palace in Udaipur—accounted for 88 percent of the company's total net worth.

Founded in 1983 by Captain CP Krishnan Nair, at the age of 65, Hotel Leelaventure went on to become one of India's top luxury hotel companies. Nair, originally a textile entrepreneur, named both businesses after his wife, Leela. The Mumbai property, the first suburban luxury hotel in the city, was followed by a luxury beach resort in Goa and then Bengaluru, Kovalam, Gurugram, Udaipur, New Delhi and Chennai.

In 2014 Captain Nair died. By then his son Vivek Nair had taken over as chairman and managing director. That was also the year the group's troubles peaked - mostly because of high debt incurred to expand operations and industry-wide room oversupply on account of a slow economic recovery after the global financial crisis of 2009. The hotel chain was unable to recover from that, at first selling a few properties before this final deal with Brookfield. After which the company will continue to operate the hotel in Mumbai and own certain land in Hyderabad and the joint development project of residential apartments with Prestige Developers in Bangalore. Brookfield will have a right of first refusal over the Mumbai hotel, in case that's ever put up for sale.

Hotel Leelaventure shares, that traded close to Rs 60 a piece in 2010, closed at Rs 11 at the end of trade on Monday (March 18).