JM Unit, Brookfield close in on Leela Hotel deal

Lender JM Financial Asset Reconstruction Company (JMFARC) is keen to retain about 10% of the debth it hospitality company, Hotel Leela venture, even as exclusive talks with prospective buyer Brookfield Asset Management move to an advanced stage, four people familiar with the developments told media. The Canadian private equity major is looking to pick up the bulk of JMFARC’s debt in the chain. With its hotels portfolio spanning across Delhi, Mumbai, Chennai, Udaipur, Gurugram and Bengaluru, the luxury hospitality chain’s debt exceeds Rs 3,000 crore. “The ARC is optimistic about the hotel chain’s turnaround with Brookfield coming on board and, therefore, would like to retain a certain part of the stake to get an upside later. For a long time, they have held the debt and now would like to get a piece of the value creation too,” said one the persons mentioned above. In 2014, Leela’s lenders with exposure of 95.6% of the debt had transferred the loans to JMFARC. One lender, which accounted for about 1% of the debt, assigned that to Phoenix ARC. In June this year, Hotel Leela venture’s board had approved the enabling provision to issue up to 125 crore equity shares in one or more tranches to JMFARC, which currently holds most of its debt. The potential share issue could have hiked the ARC’s stake in Leela venture to 75% from the current 26% but the proposal was not approved during the company’s annual general meeting held on August 20.