Global buyout firm Kohlberg Kravis Roberts & Co will widen its money-lending activity in India, starting with a possible lending of as much as Rs2,000 crore to Hotel Leelaventure Ltd against two of its prime properties, The Economic Times reported citing sources familiar with the negotiations.
The hospitality chain promoted by Captain CP Krishnan Nair and partly owned by ITC has reached out to the buyout firm as it has been unable to raise resources as stipulated during its previous loan restructuring package, said bankers who did not want to be identified. Its debt is more than Rs4,700 crore. Any deal, if completed, could be a structured one which may provide an upside for the private equity firm.
KKR's India head Sanjay Nayar as well as Hotel Leelaventure refused to comment on the report.
Leela faces the same plight as other corporates that took on too much debt during the economic boom before the 2008 credit crisis. The economic slowdown, accentuated by government's indecision, led to fall in revenue growth and losses as occupancy fell and room rate declined. The deal is crucial for Leela as well as for the consortium of banks that has been traditionally doing business with the hospitality group.
In June 2012, the lenders led by State Bank of India had agreed to restructure a total of Rs4,700 crore in outstanding loans with Leela. If the hotel chain fails to bring in Rs2,000-crore in capital by March-end, banks would be forced to treat the loan as a non-performing asset, forcing them to set aside more funds. The hospitality group will hypothecate its properties in Chennai and Delhi for the KKR transaction. The Rs2,000-crore loan will be for a term of two years at 17 per cent interest rate. The funds from KKR will be paid to the banks while Leela will get two more years to set its affairs in order.
Sovereign funds from Abu Dhabi, Qatar and Malaysia were also in negotiations for the transaction, The Times of India had reported earlier. The company recently told the Bombay Stock Exchange that it has not succeeded in getting offers for some of its properties. Henry Kravis, the co-founder of KKR who was in India recently, was also made aware of the potential transaction with Leela, said those two people. Kravis had said that his Special Situation Fund with a wallet size of $2 billion was looking at investment opportunities in India.
The Leela sold its IT Park in Chennai for Rs170 crore to Reliance Industries Ltd in February this year. Earlier, in August 2011, it sold its iconic property, Leela Resorts in Kovalam (Kerala) to Ravi Pillai for Rs500 crore even as it continues to manage it for the non-resident Indian industrialist. Leela also has plans to sell 3.84 acre in Hyderabad this year.