JM Financial Moves the NCLT Against Debt Struck Hotel Leela Venture for Default



JM Financial Moves the NCLT Against Debt Struck Hotel Leela Venture for Default

Mumbai: Recently, Luxury hospitality chain Hotel The Leela Venture confirmed that its debt owner has filed an application against it before the NCLT.

In accordance with the statement shared at the various stock exchange, the application is filed before the Mumbai bench under Section 7 of the Insolvency and Bankruptcy Code 2016 pertaining default. The matter is likely to be listed for hearing by the middle of next month and is expected to provide lenders with a better perspective on the valuation.

However, the luxury hotel chain continues to engage with prospective investors for a resolution. In fact, it has been desperately trying to sell some of its marquee properties in order to cut down its ballooning debt of Rs 6,000 crore as of December last year.

As per officials, there are prospective lenders. Hence, the Reconstruction Company suits it best to approach the insolvency court for better valuations. Once the company moves under the resolution process, the room for existing promoters to shape or influence the management will be severely curtailed.

In June 2018, the board of Hotel The Leela had approved an enabling provision to issue up to 125 crore equity shares in one or more tranches to JMFARC. The proposal was likely to raise the Company’s stake in Leela Venture from the current 26 per cent. However, the proposal was disapproved during the annual general meeting held in August 2018 as it would have led to the lender holding 75 percent equity of the company.

Previously, during an announcement regarding the debt situation, the hotel chain spoke about evaluating various options for a viable restructuring including the sale of a non-core asset, sale of hotel, equity infusion and debt refinancing by investors.

On Tuesday, February 26, the shares of Leela Venture closed at Rs. 10.41 a piece, down 0.73 paisa on the BSE.

The names of several investors including private equity companies have been surfacing since the past many quarters about a likely investment in Hotel The Leela. However, the troubled company has repeatedly failed to reach a settlement.

The company has defaulted on its quarterly interest payments to Life Insurance Corporation (LIC) over redeemable and secured non-convertible debentures (NCD).

Hotel The Leela Venture had said its operating cash flows were not sufficient to service its term loans and NCDs, with the funds of the company currently escrowed and monitored with its lenders.

 

Equity Shares
Hotel The Leela
Insolvency and Bankruptcy Code (IBC)
JM Financial Asset Reconstruction Company (JMFARC)
Life Insurance Corporation (LIC)
Luxury Hotel
National Company Law Tribunal (NCLT)
Non-Convertible Debentures (NCD)
Section 7 of the Insolvency and Bankruptcy Code 2016

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