Hotel Leela Venture fails to pay quarterly interest on LIC loan2 min read . Updated: 20 Sep 2014, 12:36 AM IST
In a filing to BSE, the firm said it had not been able to pay `22.50 crore towards the first instalment of interest on 31 March and, subsequently, had not paid interest which fell due on 19 June and 19 September
Mumbai: Hotel Leela Venture Ltd, that runs Leela palaces, hotels and resorts, on Friday said it has missed paying interest on a loan from Life Insurance Corporation of India (LIC) for the past three quarters.
In a filing to BSE, the firm said it had not been able to pay ₹ 22.50 crore towards the first instalment of interest on 31 March and, subsequently, has also not paid the interest which fell due on 19 June and 19 September.
Hotel Leelaventure chairman and managing director Vivek Nair said the payment was to be made to LIC.
Company chief financial officer Krishna Deshika said the firm had raised ₹ 90 crore by issuing debentures to LIC.
The repayment was to be made in four annual instalments from March 2014-2017 and the company is seeking more time for the payment, he said.
On 2 July, Hotel Leela Venture said a majority of its lenders have sold its debt to JM Financial Asset Reconstruction Co. Pvt. Ltd.
As of March 2014, the consolidated debt was ₹ 4,905.02 crore.
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.
“We have also been informed that in the meeting held on 28 June, the CDR empowered group has approved the exit of our company from CDR," Hotel Leela Venture had said in July.
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 19 March.
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 rate 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.
The shares of Hotel Leela Venture ended at ₹ 23.55 on BSE, down 1.3%, while India’s benchmark Sensex index fell 0.08% to close at 27,090.42 points.