Break-up: How the Mirach-Sahara $2 bn deal to bail out Roy fell through

Sahara Group’s efforts to raise money to secure bail for its chief, Subrata Roy, have taken another turn, with Bank of America (BofA) refuting claims it is the banker for a $2-billion financing package offered to the group by a US-based entity. California-based NRI fund Mirach Capital, headed by Saransh Sharma, was supposed to pay Sahara the money for Roy’s release from Tihar jail with the group’s landmark hotels in New York and London as collateral. However, Bank of America, which was proposed to be the banker to the deal, has refuted news of being involved in the transaction. The bank’s assertion that it is in no way connected with the bailout follows a much-hyped deal announced by Sahara with a little-known entity named Mirach Capital of the US to raise funds for the release of Roy from Tihar Jail in the national capital, where he has been lodged for about a year. Here is all you need to know about the shoddy and why it did not go through [caption id=“attachment_2083023” align=“alignleft” width=“380”]  Reuters image[/caption] 1. Mirach Capital was to replace loans worth $882 million taken from Bank of China for three of Sahara’s foreign properties  Under the proposed deal, Mirach Capital, headed by 34-year Indian origin Saransh Sharma had offered to extend a loan of $650 million to the Sahara Group, and invest around $400 million in Sahara’s properties in India. The purported transaction was to involve transfer of loans on Sahara’s three iconic overseas hotels — two in New York and one in London — to a syndicate of investors, for which Mirach had claimed to have initially deposited $1,050 million in a Bank of America account. The financing package was to be expanded to about $2 billion eventually and Sahara  was looking to use part of these funds to ensure release of Roy and his two colleagues from Tihar Jail, where they have been lodged for almost a year in a case relating to repayment of investors’ money totalling over Rs 20,000 crore. Sahara told the Supreme Court last month that it is in talks with Mirach Capital, the company Sharma set up to do the deal with Sahara. Sahara has shown the court a 5 January letter from Bank of America, saying it is holding $1.05 billion in funds in an account on behalf of Mirach Capital for Sahara, according to a court filing. 2. Sahara’s bid to raise Rs 10,000 crore depends on a 34-year-old US-based man named Saransh Sharma, accused in the past of database theft and forging documents for loans. Reuters reported earlier that it was unclear if Saransh Sharma had the money to pull it off. Sahara’s head of corporate finance, Sandeep Wadhwa, said Sahara’s lawyers had verified with Bank of America that Sharma has deposited just over $1 billion in an account at the bank that is “earmarked for the said transaction”. That account, however, doesn’t appear to exist, the Reuters report had said. A manager at the bank told Reuters that he didn’t write a crucial document attributed to him: an email, sent in his name to Sahara, which purported to verify the account’s existence. After Reuters asked the bank to look into the account, spokeswoman Jumana Bauwens issued a statement saying: “Bank of America isn’t involved in the transaction.” Sharma had earlier admitted to stealing a database from a former employer. There are also two pending lawsuits against him alleging he forged a letter and produced fake documents to obtain a loan. Sharma had said he has learnt from his past mistakes. In 2013, Sharma sued a US hedge fund for alleged breach of contract. In a 15 December, 2013, deposition in a New York federal civil court case, Sharma admitted to fabricating an email; to selling for $10,000 a database of contacts he stole from a previous employer, the investment bank AllianceBernstein; and to lying about the sources of funds he had obtained. 3. Sahara says  it has been “cheated” by Mirach and would take all suitable legal action against the company and its officers Late on Thursday, Sahara said in a statement that it had found out that the Bank of America letter, submitted by Mirach to the Supreme Court as a proof that it had set aside “sufficient funds” for the transaction, was forged. Sahara said it had asked its lawyer in London to visit the Bank of America branch in Los Angeles and verify it: “We have now received the report … it was a forged letter,” the company wrote in a statement. Though Sahara did not specifically confirm deal talks had now been called off, it said it would take initiate civil and criminal legal proceedings against Mirach and its officials in India and in the United States for “reckless conduct.” As a result of talks with Mirach, Sahara said, it had missed out on other, alternative deals in the last three or four months. 4. Hitting back at Sahara, Mirach  has now rejected accusations of indulging in forgery and accused  Sahara of walking out of the $2 billion loan arrangement fearing repayment defaults. Denying “unfounded” allegations of forgery, the US-based Mirach Capital Group has asserted that it remains “ready, willing and able” to buy Sahara assets, but its loan offer was no longer on the table. The syndicate of five UK and US investors, which had last month made a $2 billion loan offer to embattled Sahara group chief Subrata Roy, in turn accused Sahara of repeatedly acting “to undermine the transaction, and thereby waste the time of our investors.” [caption id=“attachment_2074703” align=“alignleft” width=“380”]  Roy is still in jail. PTI image[/caption] Mirach Capital Group, which was specially formed for the execution of the Sahara deal, had initially offered a loan against Sahara group’s hospitality properties, according to its Indian-American CEO Saransh Sharma. But “Mirach has faced a number of challenges in closing this transaction; nevertheless, we remain steadfast and are ready, willing, and able to acquire these assets,” he said in an emailed statement Thursday. “The Amicus Curiae, Sahara’s legal counsel, Mr. Subrata Roy, and other essential parties including our investors, have been made privy to the details indicating our willingness and ability to successfully execute this transaction,” Mirach stated. “In spite of the court mandates to raise bail, Sahara has always been and continues to be an unwilling seller of these assets,” it said. “They have thus repeatedly acted to undermine the transaction, and thereby waste the time of our investors, SEBI, and the Honourable Supreme Court of India,” the group said. “The dangerous allegations made by Sahara are indicative of a direct intent to destabilise a deal structure that, given its high rate of return, would benefit Mirach and it’s investors,” it said. Initially, Mirach Capital Group said it had reached a deal with Sahara to provide a structured loan package, including taking over the debt on the foreign assets from Bank of China, and a sale of the Indian assets. Consistently, Mirach has been interested in an outright sale of the assets, however, Sahara would only agree to exclusivity under the loan structure as outlined, it said. “Upon recognizing their inability to make the first interest payment on the loan, and thus in danger of losing their assets at a discounted rate through default, members of the Sahara Group violated the exclusivity agreement and began shopping the assets for a sale,” Mirach alleged. “Following Mirach’s multiple notices to Sahara that they were in breach of contract, Sahara then began to take an adversarial position against Mirach, and began to attempt to discredit and smear Mirach’s reputation,” it said. 5. Mirach alleges the Sahara Group is deliberately trying to sabotage the deal to shield Subroto Roy and his assets. “Any such claims of Sahara being defrauded by Mirach are untrue and are being presented in an effort to unravel the deal and shelter Subrata Roy,” Mirach said in its statement. Proof of Mirach’s financial capabilities were previously verified directly with Sahara’s lawyers, and a simple meta data test will show no documents have been forged, it said. Upon agreement of Sahara with support from the Supreme Court of India to a sale of the assets, Mirach said it “stands ready to publicly disclose the identity of our investors who have historically earmarked funds for this transaction to which Mirach has had access.” Numerous financial institutions, legal counsel, and investors, have repeatedly declined the opportunity to engage with this transaction because of the public profile and legal troubles of Roy, it said. Mirach likewise recognized the associated risks, but nonetheless was committed to rescue the distressed assets in the centre of this proposed structure, the statement added. “In light of the breach of contract, Mirach is no longer considering an offer for the loan structure, however remains ready, willing and able to facilitate an acquisition of these assets,” it said. The new  twists are a definite setback to efforts to secure release for Roy for if the hotel deal does not go through, the government officials are likely to seize and sell Sahara assets, including its hotels and properties, to raise cash. With inputs from Agencies