DLF in talks with PEs and international hotel operators for Aman Resorts sale
Jul 29, 2013
Source : The Economic Times

 

NEW DELHI: India's largest real estate firm DLFBSE -1.25 % has ended its "exclusivity contract" to sell luxury hotel chain Aman Resorts to the original owner and founder Adrian Zecha and has begun talks with a clutch of private equity funds and international hotel operators, which includes Blackstone and Carlyle.

 

DLF had announced the sale of its luxury hotel chain Aman Resorts for Rs 1,650 crore to the Indonesian hotelier Zecha in December 2012 as part of the company's non-core asset sale strategy to reduce its debt that had crossed the Rs 23,000-crore mark.

 

The original deadline of the deal was February 2013, which was extended to June 30. "But when the buyer was unable to close the deal, the company decided to begin talks with other players," said a person close to the transaction, who did not wish to be named.

 

Zecha has been unable to raise funds for the management buyout. While he has managed to raise equity by getting on board a few private equity backers, raising debt for the transaction is taking time. He is, however, still in the fray to buy Aman Resorts, said the person.

 

DLF, Blackstone and Carlyle declined to comment.

 

The transaction is vital to DLF's debt reduction strategy. The company had expected its debt to come down to Rs 18,500 crore by the end of March 2013 with the closure of the Aman Resorts deal as well as the sale of its wind power assets.

 

While it has managed to close its wind power transactions, and had announced the sale of its 74% stake in DLF Pramerica Life Insurance to Dewan Housing FinanceBSE -1.91 % on Thursday, the Aman Resorts transaction is taking a while. DLF's net debt stood at Rs 21,731 crore as on March 31, 2013.

 

In May this year, the company had raised Rs 750 crore through issue of bonds that were to be used for development of its housing and commercial projects. Later in the month, it raised Rs 1,863 crore by issuing over 81 million fresh shares to institutional investors. This helped the company dilute promoter shareholding to 75% to comply with Sebi's minimum public shareholding norms. These funds will also be used to reduce debt.

 

In the quarter ended March 31, 2013, DLF had posted a net loss of Rs 4.19 crore, against a net profit of Rs 211.70 crore a year ago. Its total income for the quarter dropped 15% to Rs 2,225.55 crore. For the fiscal 2012-13, DLF's net was down 41% to Rs 711.92 crore. According to a Reuters report, Citigroup had downgraded DLF to "sell" from "neutral" and had cut its target price to Rs 150 from Rs 209.

 

"High leverage and mounting interest costs combined with tough macro, slowing demand, and the possibility of tighter liquidity pose significant downside risks," Citigroup said in the note on Thursday. The note added that the company would need a "rapid" resolution to its debt burden to preserve equity value over the medium term.

 

On Friday, DLF stock closed at Rs 172.05 on BSE, down 1.74%.

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