Leela might get more time to complete debt restructuring

Likely to benefit from infra-status accorded to hotel sector with development cost of over Rs 200 cr

Hospitality company Hotel Leelaventure is likely to get an extension for its corporate debt restructuring (CDR) exercise, scheduled to be completed by March.

The hospitality company is likely to draw the benefits of infrastructure status, as it has a development cost of about Rs 200 crore, a criterion in a hotel company being given the status. According to a report by HVS, infrastructure status will help Leela secure a longer loan repayment period of up to 15 years, and get interest rates 100-200 basis points lower than current ones. “The whole restructuring will become a lot easier for Leela and it may buy more time to tide over the debt crisis. Besides, banks cannot manage assets such as luxury hotels. They would not want it on their balance sheets,” said a senior hospitality sector executive.

To a query on its debt restructuring, the company did not wish to respond.

The Leela group has debt of about Rs 4,700 crore on its books and the company hasn’t managed to raise the funds required to write off the debt through the sale of non-core assets and some equity in core assets, including the Chennai and Bangalore properties.

With the hospitality sector seeing a slowdown in investment, the company hasn’t been able to find investors, though experts say this year could see a spurt in transactions.

The Leela group is pursuing an asset-light strategy. Early last year, it had sold its Chennai Business Park to Reliance Industries for Rs 170 crore. The group plans to raise Rs 3,000 crore by selling non-core assets alone. These include some of its land parcels in the country. “2013 has been a year of learning. This year, we are hopeful all our initiatives will see fruition. There will be no distraction and we can focus on uninterrupted business,” said Rajesh Jhingon, executive vice-president (operations), Hotel Leelaventure.

The company also signed a management contract last October with Shri Colonizers and Developers, which is constructing a 175 room hotel at Lucknow in Uttar Pradesh. The hotel is expected to come up in three years from the date of receiving all necessary approvals. Besides, it also managed to sell its stake in Leela Kovalam while retaining the management rights of the property in 2011 for Rs 500 crore.

The hotel company is also coming up with its ninth property in Noida through a management contract agreement with real estate developer Supertech. The 250 room luxury property is expected to be ready by 2016 at an investment of Rs 450 crore.

The company will also tie up with private equity investors to develop hotels in Agra and Lake Ashtamudi in Kerala where it owns land banks.