Kamat Hotels to use CDR route to lower debt: CFO

Kurian Chandy, CFO, Kamat Hotels , says that the hotel plans to undertake corporate debt restructuring (CDR) programme to lower it debts. The hotel chain is finding it difficult to service its debt due to rise in interest rates and dipping occupancy level. With this programme, the banks plans to lower its debt from Rs 430 crore to Rs 220 crore via CDR. 

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Below is the edited transcript of his interview to CNBC-TV18.

Q: Can you provide information of the details of entering corporate debt restructuring (CDR), how many bankers are involved, what is your current debt position and what are the new terms of negotiation that you have entered into?  

A: In the whole process around 11 bankers are involved. The total debt was around Rs 430 crore. Going forward, we were able to get some interest rate reductions for the next two-three years, which will help the company to post profitable results and sustain debts. We have also been able to increase the tenure of the debts, which has definitely helped to add more cash flows into the system.

Q: How much debt you plan to reduce till FY14 comes to an end. What kind of interest rate reduction are we talking about quarter-after-quarter?

A: The interest rate reduction is in the range of around 25 percent from the peak that we were paying. So, the average interest cost would be around 12.5-13 percent. We hope to reduce the debt substantially from Rs 400 crore to Rs 220 crore by end of FY14.

Q: What is the reason for entering CDR fundamentally, how exactly was business doing that you couldn't sustain interest rate payments, which you had earlier negotiated?

A: A large part of the debt were raised around 2008 when the going was good, average room rates (ARRs) were moving upwards and occupancies were high.   

Post 2008 with the downfall, the ARRs, occupancies came down and the interest rate shot up. Interest rates shot up from single digit to 14 percentage which strained our cash flow. Sustaining the interest and the repayments became difficult due to low occupancies, so we went for CDR.

 

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