By P R Sanjai/MCT
Hospitality firm Hotel Leelaventure Ltd said a majority of its lenders have sold its debt to JM Financial Asset Reconstruction Co Pvt Ltd.
The State Bank of India (SBI)-led consortium of banks had restructured Hotel Leelaventure’s debt under corporate debt restructuring (CDR) mechanism effective January 2012.
Troubled loans are usually referred to the CDR cell of the lenders after a majority of them approve a recast, which could entail a lower interest rate, a longer repayment period, or the conversion of overdue interest into the loan principal. This is done after a loan turns bad.
The total debt of Hotel Leelaventure as on June 30 was about Rs50,000mn, of which about Rs40,000mn was from the CDR lenders.
“We have been informed by SBI that out of 17 CDR lenders, 14 lenders with exposure of about 97% of the total CDR debt have assigned the debt in favour of JM Financial Asset Reconstruction Company on June 30,” the company said in a filing to Bombay Stock Exchange.
“We have also been informed that in the meeting held on June 28, the CDR Empowered Group has approved the exit of our company from CDR,” Hotel Leelaventure said.
The first Leela hotel was launched in Mumbai in 1987.
In a span of 25 years, Leela Palaces, Hotels and Resorts had expanded to eight luxury properties in New Delhi, Mumbai, Bangalore, Gurgaon, Udaipur, Goa, Chennai and Kovalam. New hotels are opening in Noida, Agra, Jaipur and Lake Ashtamudi in Kerala.
The Reserve Bank of India (RBI) has recently permitted asset reconstruction companies (ARCs) to buy bad loans from their sponsor banks, provided these loans are auctioned “in a transparent manner, on arm’s length basis, at prices determined by the market factors,” the central bank said in a notification on its website on March 19.
ARCs have also been allowed to use a part of their funds raised from qualified institutional buyers (QIBs) to ‘restructure’ financial assets, RBI said.
As part of the restructuring process, companies are either given more time to pay back money or given loans at a softer interest rates to nurse them back into health. QIBs are the main source of funding for ARCs and so far funds raised through them could be used only to acquire distressed assets from banks.