Hotel Leelaventure to sell Kerala hotel

Hotel Leelaventure today said it would sell its luxury hotel property in Kovalam, Kerala to Travancore Enterprises (TEPL) for Rs 500 crore, in an effort to reduce its debt.

The sale will be structured in such a manner that Leelaventure will transfer the hotel undertaking to a subsidiary special purpose vehicle (SPV), which will be then acquired fully by TEPL.

"...Pursuant to such transfer of undertaking to the SPV, TEPL shall acquire 100% of the shares of such SPV from Leela for a total cash consideration of Rs 500 crore," Leelaventure said in a filing to the Bombay Stock Exchange.

Leelaventure said the deal was pursuant to the decision of the board to pursue an 'Asset Light Strategy' to reduce its debt.

The company's debt is currently estimated at Rs 3,950 crore. It has been looking to raise funds through sale of land and promoter equity to repay debt.

The hospitality chain has been holding talks with 2-3 private equity players to raise up to Rs 600 crore.

In May this year, the company's board also approved fund raising of up to Rs 1,000 crore by way of qualified institutional placement, FCCB and others.

The company, however, said it would continue to manage the Kovalam hotel under 'The Leela' brand name through a long term management contract to be finalised with the SPV.

The deal is subject to shareholders and regulatory approvals, it added.

TEPL is owned by B Ravi Pillai, an Indian industrialist from Kerala, based in Saudi Arabia dealing in the petrochemical business. He was awarded the Padma Shree in 2009.

The company is also actively reviewing proposals for other management contracts in other parts of the country.