Sahara India Pariwar chief Subrata Roy is closer to being released from jail in India amid news that the Plaza hotel and Grosvenor House will be refinanced to help pay his bail.
Roy has been imprisoned since March and has been pursuing a number of options, including the outright sale of the properties.
Sahara has asked the Supreme Court in New Delhi for permission to re-mortgage the Plaza and Dream hotel in New York and the Grosvenor House in London, raising Rs30.7bn (USD496m). Roy’s bail is USD1.6bn.
Sahara lawyer Rajiv Dhawan told the court: “This is the best possible deal we could have after the proposal to sell the hotels to the Sultan of Brunei fell through in August. We do not want to sell them in distress.”
The move comes after a consortium of investors is reported to have agreed a USD1.55bn loan to Sahara Group, lasting one year. The loan would help refinance the current mortgage held by Bank of China and backed by the three hotels.
The deal is being lead by Mirach Group and, according to reports, is seeking to syndicate a portion of the debt and is in talks with several lenders, including Highbridge Capital Management, a unit of JPMorgan Chase & Co.
The Supreme Court is due to hold its next hearing on 17 December.
The Sahara Group has also sold off land in Gurgaon for Rs1,211 crore to real estate firm M3M India Limited, with rumours suggesting it has also sold two more land parcels – one in Vasai, Mumbai (Rs1,111crore), and another in Jodhpur, Rajasthan (Rs140crore). The group is thought to be in talks to sell a fourth, in Pune.
In October Roy was returned to his jail cell after failing to do a deal to raise USD1.6bn for bail. Roy had been operating out of a makeshift office in the prison to try and sell hotels including the Grosvenor House and the Plaza.
A source close to the company told Reuters that Roy did not have enough time to complete the sale, commenting: “Any negotiation of big-ticket items takes time, out of which maximum time gets spent on conducting due diligence and working out the current valuations. Roy and his team are working hard and trying their best even in wake of the current restrictions that Roy is in now.”
Roy, who calls himself Sahara’s ‘managing worker’, was arrested at the beginning of March for contempt of court, after failing to appear at a hearing. The company is a sponsor of India’s national cricket team and a large shareholder of a Formula One team and is reckoned by many to be the country’s largest private employer.
The company has been battling with India’s Securities and Exchange Board, after two Sahara subsidiaries raised over USD4bn in convertible bonds from around 30 million small investors in 2008. The Securities and Exchange Board said that the company had flouted capital market rules by calling the bond issue a “private placement” in order to avoid regulatory scrutiny and ordered it to repay the investors, along with 15% a year interest.
Sahara appealed, but the ruling was upheld. Sahara transferred USD900m to the Securities and Exchange Board for repayment along with a vast quantity of documents about the investors, described by observers as “lorryloads”. The Board said it had issues confirming the identities and then, last year, ordered that the two companies involved have their assets frozen, having, it said, failed to pay the money back.
As Roy was being pursued for arrest (he claimed to have been unable to appear in court as his mother was unwell) the company published a full-page advertisement in many Indian newspapers claiming to have directly repaid about USD4.9bn to investors.
During the two months Roy was negotiating the possible sale of the Plaza and Grosvenor, he was living in a makeshift office within the prison compound and, on occasion, was allowed out to negotiate. Since then he has been moved back into the main jail and away from the air-conditioned facilities. Roy will be hoping for a release before winter ends and the heat is turned back up.
HA Perspective [by Chris Bown]: Roy is not the first businessman to overestimate his ability to swing the authorities to his way of thinking. The Indian establishment felt it had to take a stand against Sahara’s unusual way of raising funds from small time investors, and asking for those funds to be repaid has revealed that not only have they been spent, but they were spent buying assets that are difficult to liquidate.
Quite why landmark London and New York hotels should be so difficult to liquidate is unclear. During the period Sahara has been trying to sell the New York Plaza, Hilton managed to sell the nearby Waldorf Astoria to Chinese investors, and plenty of London property changed hands. Serious buyers from Brunei, Qatar and India have all reportedly been taking a close look at the opportunity to buy; and with both the London and New York markets performing strongly, the hotels make attractive holdings.
This story has had several interesting twists and turns already. Don’t bet on Roy cutting a deal to get out of jail for Christmas.