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JM Financial ARC to take majority stake in Hotel Leelaventure

The board of Hotel Leelaventure Ltd has approved a plan to transfer a majority stake to JM Financial Asset Reconstruction Co. Ltd by converting a part of debt to equity.

JM Financial ARC's stake in the luxury-hotel chain will rise to about 75% when the transaction is completed from 26% at the end of March. The deal is subject to approval of the shareholders, stock exchanges and other regulatory authorities, Hotel Leelaventure said in a stock-exchange filing on Monday. The company's promoters currently hold an about 47% stake.

The board has approved issuing up to 125 crore equity shares of Rs 2 face value each in one or more tranches to JM Financial ARC on a preferential basis to convert part of debt into equity.

In order to issue equity shares to JM Financial ARC, the board also approved increasing the company's authorised share capital to Rs 460 crore from Rs 260 crore, the filing said. The company will seek shareholders’ approval at its annual general meeting in August.

The development comes four years after Hotel Leelaventure’s plan to raise a bridge loan from an arm of Kohlberg Kravis Roberts & Co. (KKR) fell through as the company did not agree to terms offered by the private equity giant.

The Leela Group was founded by late Captain Krishnan Nair in 1987 and has been reeling under debt of over Rs 3,000 crore that it had raised from a consortium of 15 lenders led by State Bank of India. In 2014, a majority of lenders sold their loans to JM Financial ARC.

In recent years, Hotel Leelaventure has been selling assets to generate cash and reduce debt. It had sold its Goa property to a unit of Malaysia’s MetTube, an IT park in Chennai to Reliance Industries and a property at Kovalam in Kerala to non-resident Indian businessman Ravi Pillai.

Leelaventure is also in talks with a consortium of Blackrock, SSG Capital and RB Capital to resolve its debt problem, The Economic Times reported on Tuesday, citing managing director Dinesh Nair. VCCircle could not be immediately verify this information.

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