Bank of China takes control of Sahara’s Grosvenor House to recover loans

Compounding the troubles for crisis-hit Sahara Group, creditors have taken control of its iconic hotel property Grosvenor House, estimated to be worth over Rs5,000 crore, to recover its loans.

Bank of China, which had financed Sahara nearly $900 million for its hotel acquisitions, has now initiated legal action against the company for defaulting on a loan, reports quoting sources said.

The bank appointed Deloitte as administrators to Sahara properties last night after "it defaulted on debts tied to the hotel", according to a report in Australia's Daily Telegraph, which said that Grosvenor House may fetch it about £500 million  (approximately Rs5,000 crore).

This is more than £470 million that Sahara Grosvenor House Hospitality Ltd had paid in 2010 for London's largest luxury hotel (See: Sahara to buy UK's Grosvenor House for Rs3,000 crore).

Sahara Group had acquired the three iconic hotels in London and New York between 2010-2012, at an estimated cost of $1.55 billion. The three hotels are currently valued at an around $2.2 billion.

Grosvenor House, a landmark property on Park Lane, London, is one of the three marquee hotels owned by Sahara outside India, the other two being Plaza and Dream Downtown in New York.

Sahara has been banking on the three hotel properties to raise funds to secure the release of its chief Subrata Roy, who has been languishing in New Delhi's Tihar jail for a year now for want of Rs10,000 crore for release on bail.

The Sahara group, with interests in real estate to TV channels and Formula One, is already in deep trouble, after the company was found guilty of illegally raising money from millions of investors, bypassing market regulator Securities and Exchange Board of India (Sebi).

Roy and two other directors of the group have been serving jail term after the company failed to comply with a court order to repay investors in the illegal bond programme (SC orders Sahara chief Roy's arrest for avoiding court appearance).

Sahara has been trying to raise bail money using its properties, including New York's Plaza hotel and Grosvenor House in London.

Talks with an obscure US-based group, Mirach Capital, to raise $2 billion collapsed in February after it came to light that a bank letter underpinning a proposed deal was forged (Sahara chief to stay in jail as Mirach calls off hotel deal).

US authorities are now probing the alleged forging of bank letters by Mirach Capital in its offer to buy Sahara's hotel properties.

Sahara had told the Supreme Court that it was considering other proposals to raise funds, including selling a luxury housing development project outside Pune, near Mumbai.

Meanwhile, Sebi, which has been locked in a lengthy legal battle with Sahara over the bond programme, has cancelled the portfolio management licence of Sahara's asset management division, stating that Sahara running a portfolio management business could "cause prejudice to the interests of investors and the safety and integrity of the securities market".

The portfolio management business had assets under management of just Rs77,00,000 ($125,000) as of end-February, according to the SEBI order.

The firm's mutual fund business, which runs under a separate Sebi licence, managed Rs147 crore as of December 2014, according to fund management industry body AMFI.