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BoA refused to be part of Sahara deal citing integrity issues: Saransh Sharma

Interview with Chief Executive Officer, Mirach Capital

N Sundaresha Subramanian  |  New Delhi 

Saransh Sharma

Miami-based Mirach Capital Group’s founder, Saransh Sharma, 34, has gone from a virtual nobody to a regular headline grabber in the international media in a few weeks, though not for all the right reasons. His much-publicised ‘largest ever deal from a prison’ to help Sahara group chief Subrata Roy is on the verge of collapse after intense media scrutiny, resulting in allegations and counter-allegations. In his first detailed interaction since the news of Bank of America denying involvement with the $1.05-billion deal involving the Sahara group’s hotel assets in New York and London, Sharma explains the events and circumstances that led to the present state of affairs. Days before the February 20 deadline for the deal to go through, he tells N Sundaresha Subramanian that Roy is looking for a sweetheart deal at super-high valuations, which he might never get.

There was a lot of media scrutiny into the deal since the Supreme Court asked for a Reserve Bank of India clearance last month. A lot of it was fed by your own statements in the initial days. Do you think this contributed to the virtual collapse of the deal??

Absolutely not. At the center of the collapse was Sahara’s unwillingness to part with these trophy assets. My public comments regarding our strategy in acquiring these assets — following a likely default — seems to have rattled the Sahara group. While initially amenable to accepting a loan, the fear of Mirach’s strategy seems to have materialised, along with the realisation that they did not have the liquidity to make the first interest payment. They unknowingly approached members of our syndicate while shopping for a new deal, thereby breaching our contract.

Is it right to say the deal has collapsed, with you and the Sahara group now making allegations against each other?

We recently presented a letter outlining our options to the Sahara group in the interest of completing this transaction. We have yet to receive a response, with the Supreme Court deadline of February 20 approaching. The allegations Sahara is making against Mirach are likely an effort to buy time, when no time is needed. Mirach, along with the SC and the world at large, is ready to see an end to this story. Mirach and its investors stand ready, willing, and able to do just that, by completing a sale of these assets and, thereby, facilitating a return of the money to the creditors of Sahara.

You have mentioned that Sahara has been an “unwilling seller” and was trying to scuttle the transaction. Can you shed more light on this? What makes you think they are unwilling and how did they try to scuttle the transaction?

Historically, Sahara has demanded premium, unrealistic valuations for the offshore hotels. For example, Mr Roy believes these properties are worth $3 billion, miles away from reality as the iconic Plaza loses money under mismanagement and the Grovsenor House income is supporting the other properties. Our group, along with previous interested investors, have persistently made several direct, fair offers since our entrance to this transaction. Our recent offer of a $2.05 bn package, through loan or sale, has gone unanswered.

The court has been proceeding on the premise that it is in Subrata Roy’s interest to get out of the jail by paying the bail money as early as possible. But you seem to be suggesting they are more keen on keeping the assets rather than hurrying for bail. Why would they do that?

That answer would need to ultimately come from Roy. In our experience, there is a great deal of pride and ego at play here. Roy, in our opinion, is an acquirer of assets, not a seller. In our short engagement in this deal, we have offered a fair structure and a win/win solution for Roy, the SC and our investors. Sahara, on the other hand, has informed the court that they have received 28 offers over the past year. With a year to structure a deal, and a multitude of offers, they have remained unsuccessful. One can easily conclude there is no impetus present to complete this transaction. Just days before beginning the closing process, the transaction has now seemingly fallen victim to deliberate sabotage through these recent allegations.

The Reuters investigative piece of last week has Sahara’s Sandeep Wadhwa saying the documents were checked by lawyers and it has one of the lawyers saying there was no separate check with the bank. However, elsewhere they said they relied on a mail. What is the truth, according to you?

The email verifying financial capabilities was received directly from Bank of America (BoA) to Sahara. As I previously stated, a simple meta-data test can confirm this. A few days later, BoA Corporate informed us that they would not be a party to this transaction in any way, shape or form, citing integrity issues with Sahara. We then notified both the amicus (in the case) and Sahara of this development.

As an alternative, it was requested that blocked/earmarked funds be shown. Mirach, which never had the funds in its own accounts and was transparent of such to everybody, was able to leverage its syndicate investors and blocked funds to provide the alternative as requested by Sahara. Emails approving the language of the letter from BoA to Sahara’s legal council were also present.

There is now confusion within Sahara, seemingly stemming from Roy’s discomfort with the current deal structure. My past litigations were never a problem. Roy hired a legal practitioner with no authority, jurisdiction or details of the transaction, who began speaking to members of the media. He additionally instructed third-party brokers from Lucknow, also with no authority and, thus, violating protocol, to engage the bank as well. Together, with a select group of zealous reporters, they began probing the delicate banking infrastructure. We are being told there were also six or seven different versions of the letter being submitted, with wording and letterhead changes. We are currently vetting legal action on these grounds.

The transaction was never intended to take place at BoA, as they clearly never wished to be involved in this matter. It is with our deep regret that their name has been brought into this fiasco that Sahara has created. Our investors have identified the bank where the closing for a sale transaction will occur, and upon a successful deal, these details will be revealed publicly.

You were present in the SC last month and had personally presented the BoA letter which set out out the February 20 deadline, based on which the court allowed Subrata Roy the negotiation facilities. Now, when the bank spokesperson says they are not involved in the transaction, where did this letter come from??

No letter was ever given by me. It was presented by Sahara’s attorneys to the SC.

Where is the $1.05 bn that was supposed to be in this account?

Full disclosure will be made, provided a deal is reached, including the sale of the assets.

Is BoA backing out of the transaction after initially agreeing to it? The Reuters story says Nuno Marques, a BoA banking centre manager in Wellington, Florida, declined to give the details of the account to his colleague. Doesn’t this suggest Mirach did have an account with BoA?

Again, BoA was never involved in the transaction. They were simply verifying funds on behalf of syndicate members. The closing of this transaction was always designated to be at another bank. Mirach did have an account with BoA.

A number of details about your background, including an admission of theft and allegations of forgery, have come out. What are your comments on these? Was the Sahara group not aware about these details when they agreed to do deals with you?

There is a lot of misinformation about my past. First, there was never an admission of theft. The Reuters article put things out of context and things have gone viral since. The information, now commonly referred to as a “call list”, was in my possession as part of my employment with a firm. This information was passed on to another person when I was 28 then, without the knowledge of the various complexities. I never received any compensation for it, nor are there any charges or allegations associated with this. I think the rumour is somewhat of a creative manipulation of the facts, taken out of context.

Second, the two litigations are severely misunderstood. They both arise from the fallout of a single transaction. The SPV (special purpose vehicle) involved in both had executed on a subscription agreement with a fund, in anticipation of its investor executing a counter subscription agreement with the SPV. However, when the investor backed out, the fund manager started to pursue litigation to claim his unearned subscription fee. Additionally, sensing an opportunity, a third party set of brokers also sued for their unearned fee.

No financial loss had been incurred by anyone except for me and no services were ever rendered, for which intermediaries were seeking fees. These individuals or entities simply saw a young, successful individual and decided to pursue legal action to demand some form of a settlement. However, no settlement was ever made. Once again, these transactions have no consequence on the Sahara deal and Sahara was previously aware of all. If anything, it perhaps gave Sahara ammunition to destabilise the Mirach transaction.

Additionally, it should be noted that I have granted full transparency to my investors in all of these instances, and they stand by my side, ready, willing and able to complete a transaction. I, likewise, stand dedicated to closing this deal, so that the story shifts from Saransh Sharma’s past to stabilising the 50,000 jobs at stake, restoring the value to the marquee assets that are suffering, and returning the funds to the creditors of Subrata Roy.

Who are your investors? Are they still interested in the transaction?

While the investors were shaken, given the recent allegations, they are eager to see Sahara’s response to our offer. They continue to be ready, willing and able to act for an outright sale of these assets. As previously stated, they have agreed to disclose their identities at that time.

You and the Sharma family trust are said to have interests in Vipul group projects in Gurgaon. What is your exposure to real estate in India?

I personally have no exposure to real estate in India, except secondarily from what my parents have purchased historically.

You are now demanding fees and damages from the Sahara group. This is similar to the dispute your other firm, Antares Capital, had with Global Innovation Fund. What happened to that dispute? Did you settle it?

With regard to the Sahara group, I am demanding primarily that the assets be sold to us. It is known that Sahara is illiquid and cannot cover the initial interest payment of $18 million and the salaries of its employees, let alone my fees. While I am entitled to fees under our agreement, the first people that should be paid are the unpaid employees of Sahara, who worked day and night on this transaction to get their chairman out of jail, while he continues to waste the time of the court and Mirach. As for Antares Management, no settlement was reached and that dispute has been put to rest.

You have met Subrata Roy several times in the recent past. You are a good reader of minds. What do you think his plan is, given the various constraints he has?

Mr Roy will have to answer publicly as to his intentions through doing the right thing and completing the sale of these assets. In my opinion, his plan is simple. He is awaiting a sweetheart deal, a complete bailout package — no liens, very few security documents in place, over two to three years to repay the money, with very low interest rates. Those of us tethered to the seriousness of the situation are ready to move swiftly to make a more realistic scenario unfold. I don’t think Mr Roy acknowledges the tidal wave of problems forthcoming for Sahara if they don’t resolve these matters in an expedited fashion.

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First Published: Wed, February 11 2015. 22:40 IST