Debt-laden hospitality firm Hotel Leela Venture will sell its assets to Canada-based private equity firm Brookfield Asset Management for ₹3,950 crore.

The deal covers four hotels, in Bengaluru, Chennai, Delhi and Udaipur, on a slump sale basis.

The deal also gives Brookfield a 100 per cent shareholding in Leela Palaces and Resorts Ltd, which owns certain properties and holds the licence to develop a hotel in Agra. These account for nearly 80 per cent of Leela’s revenues and 88 per cent of the company’s net worth.

Leela will continue to operate a hotel in Mumbai and own some land in Hyderabad. It will also continue to jointly develop residential apartments with Prestige Developers in Bengaluru. Brookfield will have the right of first refusal over the company’s hotel in Mumbai.

To repay all debt

In a communication to the BSE, the hotel chain company said the proceeds of the sale will be used to repay its lenders. “After completion of the aforesaid transaction, all borrowings of the company from all banks and financial institutions would stand repaid,” said a statement.

Under the agreement, Brookfield will pay ₹150 crore for all the intellectual properties of Leela. The deal will also include the sale of the ‘Leela’ brand to Brookfield.

A licence and centralised services agreement will be signed for The Leela Hotel, Mumbai, along with leasehold rights being transferred in the name of Brookfield for 24,404 square metres of land on Old Airport Road, Bengaluru.

Joint development

A new a joint venture agreement between Brookfield and the promoters of Leela will be signed to carry out development activities jointly in the future.

Ankur Gupta, Managing Director and Head-India Real Estate, Brookfield, said: “The Leela is one of the finest hospitality groups in India and over the years it has gained extraordinary recognition from some of the most prestigious authorities on travel and luxury in the world. We are excited with this opportunity and look forward to completing this transaction at the earliest, while ensuring that all operations remain unaffected.”

JM Financial Asset Reconstruction Co, which owns most of Leela’s debt, had recently filed an application with the Mumbai Bench of the National Company Law Tribunal (NCLT).

The application was filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) after the company failed to arrive at a concrete plan to pay off its debt.

At the end of December 2018, Leela had a debt of ₹6,164 crore. The company’s losses widened to ₹89 crore in the nine months ended December 2018, against ₹7.42 crore in the same period a year ago.

 

 

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