INSUBCONTINENT EXCLUSIVE:
Hotel Leelaventure's shareholders have overwhelmingly backed the proposal to sell key hotel assets to Brookfield Asset Management though the
transaction cannot go ahead till the capital markets watchdog completes its investigation into complaints made by key Leela shareholders
Nearly 86 per cent of all shareholders voted in favour of the resolution with institutional and non-insitutitonal shareholders supporting
it by over 70 per cent, a Leela notice to the shareholders showed
The results were released to the public after Securities and Exchange Board of India allowed Leelaventure to do so
The market regulator had asked the firm and Brookfield to hold off on proceeding with the transaction earlier in the week after two key
shareholders ITC and LIC complained of some irregularities
While all the promoters polled in favour of the deal, 74.87 per cent of public institutional investors and 74.9 per cent of
non-institutional public investors who cast their votes also backed the move
It is not known how LIC and ITC voted
Voting through postal ballot began on March 26 and ended on April 24
Meanwhile, it has emerged that ITC which in an unexpected move approached the National Company Law Tribunal earlier this week challenging
the deal, had abstained from voting in 2017 when JM Financial Asset Reconstruction Company (JMFARC) moved a special resolution to convert
People close to the development said that the cigarettes-to-hotels major also did not engage in talks to buy the assets when approached by
ITC did not respond to an email seeking comment till press time Friday.
“This is not a new deal
Lenders are interested in recovering their money as much as possible and as fast as possible
They approached all the big players in the industry but at that time, they (ITC) were either not serious or probably ignored it,” said a
banking source familiar with the developments
“They are trying to scuttle this deal because either they want the assets at throw away prices or they want to ward off a big
international competitor.”
ITC which holds a 7.92 per cent stake in Leelaventure and another minority investor, Life Insurance Corporation
of India, have also approached Sebi, complaining that the deal violated rules on related-party transaction
They also alleged “oppression” of minority shareholder interest and “mismanagement” by the promoters and JMFARC that holds a 26 per
cent stake in the company after the conversion of debt into equity.
On September 3, 2018, ET reported that Brookfield and Leelaventure were
in advanced talks for a deal.
“They are talking about JM Financial ARC holding 26 per cent shares which diluted their stake but that 26
per cent did not come out of thin air
As per the 2013 corporate debt restructuring documentation, the lenders have the right to convert their loan into equity which was approved
They didn’t object then to the lender’s right to convert
It has been two years,” said a banker
“In 2017, JMFARC moved a special resolution for the shareholders that it was converting the loan into unsecured equity of 26 per cent
ITC abstained from voting in that resolution
If they had said negative vote at least they had some grounds to complain now
they don’t have a ground,” he added.
In its petition to the NCLT, ITC alleged that the conversion of debt into equity by JMFARC had
diluted its stake to 7.92 per cent from 11.78 per cent.
In 2014, Leelaventure’s lenders who held 95.6 per cent of its debt had transferred
One lender, which accounted for about 1 per cent of the debt, assigned that to Phoenix ARC.
In June last year, Leelaventure’s board
approved an enabling provision to issue up to 125 crore equity shares in one or more tranches to JMFARC, which currently holds most of its
The potential share issue could have hiked the ARC’s stake in Leelaventure to 75 per cent from the current 26 per cent, but the proposal
was not approved during the company’s annual general meeting held on August 20.
Even if the Leela-Brookfield deal goes through, JMFARC and
other 14 lenders will have to give up on some of the money outstanding, experts said.
In its petition to the NCLT, ITC alleged JMFARC had
moved a petition in the tribunal in January this year against Leelaventure with an intent to pressurise the promoters to dispose of their
Brookfield has filed an application in the NCLT to make it a party to ITC’s petition, ET reported on Friday.