KKR to lend Rs 2,000 crore to Hotel Leelaventure

MUMBAI: Kohlberg Kravis Roberts & Co., the globally renowned buyout firm will widen its money-lending activity in India, possibly lending as much as Rs 2,000 to Hotel Leelaventure Ltd, against two prime properties, two bankers familiar with the negotiations said.

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 the bankers who did not want to be identified. Its debt is more than Rs 4,700 crore.

Any deal, if consummated, could be a structured one which may provide an upside for the private equity firm. In December last year, Hilton Worldwide Holdings Inc, the world's largest hotel operator, raised $2.35 billion in an IPO, the largest by a hotel company. The nominal gains of the Blackstone group, Hilton's owner, is among the largest for a private equity company, according to international media reports.

KKR's India head Sanjay Nayar said "No comments," while Hotel Leelaventure did not respond to an email seeking comment.

The hospitality chain faces the same plight as other corporates which took on too much debt during the economic prosperity before the 2008 credit crisis. The economic slowdown, accentuated by indecision by the government, 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 company.

In June 2012, the lenders led by State Bank of India had agreed to restructure a total of Rs 4,700 crore loan outstanding with Leela. If the hotel chain fails to bring in Rs 2,000-crore 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 Rs 2,000-crore loan will be for a term of two years at 17% 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. "A lot of mid-sized and smaller companies today have found that they can't get capital," Kravis was quoted as saying. "We can provide some capital to help them out.'' Hotel Leelaventure -- which currently owns and manages eight hotels in the country with 2,211 rooms -- incurred a loss of Rs 433.4 crore in fiscal year 2012-13. Its operating revenue rose 14% to Rs 653.8 crore in 2012-13. The Leela sold its IT Park in Chennai for Rs 170 crore to Reliance Industries Ltd in February 2013. Earlier, in August 2011, it sold its iconic property, Leela Resorts, in Kovalam (Kerala) to Ravi Pillai for Rs 500 crore even as it continues to manage it for the NRI industrialist. Leela also has plans to sell Rs 3.84 acre in Hyderabad this year.

Data released by CDR forum shows that by December 2013, 259 cases amounting to Rs 2,07,635 crore were being considered for restructuring, a sharp rise from March 2013 when only 33 cases amounting to Rs 32,083 crore were considered for loan recast.