Sahara India Defaults on Luxury Hotel Loans From Bank of China

Sahara India Pariwar defaulted on loan agreements with Bank of China Ltd. that were secured against three luxury hotels in the U.S. and U.K., resulting in the recent appointment of an administrator to sell the Grosvenor House hotel in London.

Sahara, which is controlled by financier Subrata Roy, said there had been “technical breaches” of financial covenants on loans from Bank of China for the Plaza and Dream Downtown hotels in New York, according to an e-mailed statement released on Tuesday evening in India. As a result of cross-collateral, the loan on the Grosvenor hotel in London “also is being treated under default,” Sahara said in the statement.

A Beijing-based spokeswoman for Bank of China wasn’t immediately able to comment.

Deloitte LLP said on Monday it was appointed as administrator for Sahara Grosvenor House Hospitality Ltd., which owns the leasehold title to the London hotel, located on London’s Park Lane. It is working with property consultant Jones Lang LaSalle Inc., and is seeking about 500 million pounds ($770 million) for the property.

Sahara, a financial services group based in Lucknow, had been trying to raise new mortgages on the three overseas hotels in order to pay the 100 billion-rupee ($1.6 billion) bail for Roy, who has been in prison in New Delhi since March last year.

Contempt Charge

Roy was sent to prison after being charged with contempt of court for failing to comply with an order to refund investors. India’s markets regulator had said the company should repay $3.9 billion to investors for selling a convertible debt instrument without approval.

Roy failed to convince an Indian court that Sahara had refunded money raised from 30 million investors in the debt. The regulator said it couldn’t verify Sahara’s claim.

Sahara said it will continue in its attempts to refinance the hotel loans and regain control of the properties, according to the statement.

Roy, known as “Sahara Sri” to his employees, built Sahara into an investment group spanning real estate, hospitality, sports and financial services. Some of the funding for the expansion came from street food sellers, laundry washers and tire repairmen who contributed sums as small as 32 cents a day over the past 35 years.