BQ: NCLAT Directs NCLT To Decide On ArcelorMittal’s Essar Steel Bid By March 8

28 February 2019: The National Company Law Appellate Tribunal today asked the Ahmedabad bench of the National Company Law Tribunal to pass its final order in the Rs 42,000-crore resolution plan submitted by ArcelorMittal for the insolvent Essar Steel by March 8.

Earlier, the NCLAT had given time till Feb. 28 for the NCLT to deliver its final order in the case, stating that the appellate tribunal would take over from March 1.

In October 2018, the committee of creditors for Essar Steel had selected the Lakshmi Mittal-owned company as the winning bidder for the insolvent steelmaker. ArcelorMittal’s plan included payment of Rs 42,000 crore for financial creditors against their dues of over Rs 49,000 crore. The Ruia family, which owns the Essar Group, had at the time offered to settle all dues in the company with a settlement plan of over Rs 54,000 crore, which was rejected by the lenders.

On Jan. 29, the Ahmedabad bench of the NCLT said the promoters of Essar Steel don’t have the right to seek for a settlement of loans and said that only the parties that had filed the insolvency petition in the first place could settle the loans. State Bank of India and Standard Chartered Bank had approached the bench in August 2017 to file an insolvency petition against Essar Steel after the Reserve Bank of India asked banks to do so.

The NCLAT allowing more time to the NCLT to deliver a judgment on Essar Steel’s insolvency process has added to the already delayed procedure. The delays have been cause by multiple litigations filed by the Ruia family, operational creditors and other financial creditors in the insolvency proceedings for Essar Steel over the past 18 months. The case has dragged for over 500 days, longer than the 270-day deadline set for resolution under the Insolvency and Bankruptcy Code.

The Ahmedabad bench of the NCLT, on Thursday, decided that cases filed by eight, out of the 40 operational creditors who opposed the ArcelorMittal’s resolution plan, should be dismissed. The operational creditors whose cases have been dismissed are Orissa Stevdores, Kamaljeet Alhuwalia, Signode India, Timken India, Hind Aluminium Industries, Arkay Logistics, Essar Bul Terminal and Allied Metallurgical Products.

The NCLT is yet to pronounce an order on cases filed by the remaining 32 operator creditors. A detailed order of the NCLT is awaited.

The Bloomberg Quint reported

BS: NCLT rejects Essar Steel’s operational creditors plea against Arcelor’s bid

28 February 2019: The National Company Law Tribunal (NCLT)-Ahmedabad on Thursday rejected debt-laden Essar Steel India’s (ESIL’s) operational creditors (OCs) plea against ArcelorMittal’s Rs 42,000-crore bid. It is seeking consideration of promoters Essar Steel Asia Holding’s (ESAHL’s) Rs 54,000-crore proposal.
 
Around eight OCs, including Orissa Stevedores, Signode India, and Timken India, among others, had filed a plea seeking quashing of Arcelor’s resolution plan and consideration of ESAHL’s proposal. However, in a common order, the two-member Bench, comprising adjudicating authorities Harihar Prakash Chaturvedi and Manorama Kumari, rejected the same.
 
Led by the State Bank of India, the committee of creditors had approved Arcelor’s plan in October 2018 and placed it before the tribunal for approval. However, soon after, Essar Steel’s promoter Ruias had made a settlement offer of Rs 54,000 crore through ESAHL.
 
While ESAHL’s offer looked to pay OCs in full, Arcelor’s plan carries a condition that OCs with dues of more than Rs 1 crore each would not get anything according to ESIL’s liquidation value. OCs with less than Rs 1 crore dues will be paid in full, amounting to a total of over Rs 190 crore under the Rs 42,000-crore bid of Arcelor.
 
“We have rejected the plea by the OCs (eight of them) and disposing off the applications. Principal observations would be available in the detailed order following later,” the tribunal said in an oral order.
 
The order comes on a day when the National Company Law Appellate Tribunal directed the NCLT to pass order in the Essar Steel case by March 8, after which the appellate tribunal would hear the matter from March 14 onwards. It needs to be mentioned here that while the Insolvency and Bankruptcy Code (IBC) provides for resolution within 270 days, after which a company has to be liquidated, litigation in the Essar Steel case has led to the process prolong for over 580 days now.
 
Part of the first list of a dozen defaulters against whom the Reserve Bank of India had asked lenders to initiate proceedings under the IBC, Essar Steel has seen ArcelorMittal making a takeover bid of Rs 42,000 crore, which has been approved by the former’s lenders.

The Business Standard reported

BT: Naresh Goyal steps down as Chairman of Jet Airways board

28 February 2019: Jet Airways founder Naresh Goyal has reportedly stepped down as the Chairman of the company’s board. The decision came as the debt-ridden Jet Airways is closing in on a rescue deal with Etihad Airways, news agency Reuters reported quoting sources.

Speculations were rife that founder Naresh Goyal would exit Jet Airways due to differences with the lenders and a resolution plan which prescribed the same in order to save the embattled airline.

Jet Airways has not confirmed Goyal’s resignation yet.

Presently, Jet Airways is looking to restructure its debt as well as raise funds in the face of mounting unpaid dues. Earlier in February, the company had informed the exchange that its board had approved a plan by its consortium of lenders, led by State Bank of India. The draft resolution plan primarily comprises of infusion of funds, restructuring of debts and monetisation of assets.

The Bank Led Resolution Plan (BLRP) by lenders estimated a funding gap of Rs 8,500 crore (including proposed repayment of aircraft debt of Rs 1,700 crore) to be met by appropriate mix of equity infusion, debt restructuring, sale and lease back of aircraft, among other things.

Shareholders of Jet Airways had approved conversion of loan into shares and other proposals during the extraordinary general meeting (EGM) last week.

As on September 30, 2018, Jet Airways had gross debt of Rs 8,411 crore (including terms loans from banks and dues to lessors for aircraft lease), as against Rs 8,403 crore as on March 31, 2018. The company has large repayments of Rs 1,700 crore due over December 2018 to March 2019, Rs 2,444.5 crore in FY2020 and Rs 2,167.9 crore in FY2021.

Jet defaulted in servicing its loan obligations on December 31 2018 and the 90-day window before its loans are dubbed non-performing assets (NPA) ends on 31 March 2019. The company is reeling under losses for the last four consecutive quarters with its shares losing over 60% in one year.

Meanwhile, the Jet Airways domestic pilots’ body, National Aviators Guild (NAG), has decided to defer its proposed agitation in light of the rising tension between India and Pakistan. Over 1,100 pilots of the airline unionised and represented by the NAG had planned to go on a black band protest and flight safety period from March 1. Pilots ready to cooperate for now has given Jet Airways some breathing space for now.

The Business Today reported

ET: Kotak’s distressed fund gets ADIA’s $500 million backing

28 February 2019: UAE based sovereign wealth fund Abu Dhabi Investment Authority(ADIA), has committed $500 million to a new distressed fund backed by Kotak Investment Advisors (KIA), the alternative investments arm of Kotak Mahindra Bank. 

The fund will target both pre-stress and distressed opportunities and also financially support to businesses to prevent them from entering insolvency, Kotak said in a press release. 

“This is our first distressed fund. We believe that there is a large opportunity for distressed debt in India especially with the new bankruptcy code in operation. We will also provide high yield structured credit and specific financing requirements for companies,” said Srini Sriniwasan, CEO, KIA. 

As CEO of KIA, Sriniwasan oversees $ 3.3 billion across different asset classes including private equity Funds, real estate funds, infrastructure funds and listed equities. Each of these funds have a separate CEO. The distressed fund called Kotak Special Situations Fund will be headed by Eshwar Karra, former CEO of the Kotak owned Phoenix ARC who was moved to KIA last month. 

ADIA’s investment is another indication of large funds looking to invest into the vibrant distressed debt market in India. It also comes ahead of the two day Organisation of Islamic Co-operation (OIC) meeting in UAE in which India’s external affairs minister Sushma Swaraj has been invited as a guest of honour. 

Sriniwasan said that large global funds and institutions with money to invest may also join this special situations fund. “With ADAI’s commitment we are officially up and running. There are also others who have expressed interest. Foreign investors recognise this opportunity in India,” he said. 

ADIA also has invested $500 million in two other real estate funds managed by KIA. “Institutional investors can play an important role in building a successful secondary market for non-performing loans in India. With a broad mandate to invest across asset types and sectors, our new partnership with Kotak will contribute to this process and help to ease the burden of NPLs on the Indian financial system,” said Hamad Shahwan Aldhaheri, executive director of the private equities department at the ADIA.

The Economic Times reported

BS: Jaypee Infratech’s lenders to discuss NBCC, Suraksha takeover bids Friday

28 February 2019: Financial creditors and home buyers of Jaypee Infratech will meet Friday to discuss the bids submitted by state-owned NBCC and Mumbai-based Suraksha group to take over the bankruptcy-bound realty firm and complete stalled projects comprising over 20,000 housing units.

A meeting of the Committee of Creditors (CoC) will be held on March 1, said Anuj Jain, the Insolvency Resolution Professional (IRP) of Jaypee Infratech, in a regulatory filing.

In a separate filing, Jain said the lenders have rejected a resolution to “conduct the addition forensic audit of corporate debtor (Jaypee Infratech) from Date of Incorporation till March 2014″ after voting process.

The filing did not disclose the agenda of Friday’s meeting, but sources said it has been called to further discuss the resolution plans submitted by NBCC and Suraksha group.

Sources said the settlement proposal of promoter Jaypee group will not be discussed in the CoC meet, but lenders could deliberate on it separately.

In the last meeting on February 18, NBCC and Suraksha made presentations before the CoC. Jaypee group promoters were also present at the meeting.

Jaypee group’s flagship firm Jaiprakash Associates Ltd (JAL) has once again submitted a proposal to the lenders of its subsidiary firm Jaypee Infratech for settling dues worth Rs 10,000 crore.

This is the second time in less than a year that JAL has sought to retain control of its cash-strapped subsidiary. The latest offer is almost similar to what JAL offered last year to lenders and home buyers.

In April last year, JAL had made an unsolicited offer of about Rs 10,000 crore to settle the dues of Jaypee Infratech. It had also offered 2,000 equity shares each to buyers.

The National Company Law Tribunal (NCLT) in 2017 had admitted the application by an IDBI Bank-led consortium seeking resolution of Jaypee Infratech and appointed Jain as IRP to manage the company’s business and invite bids from investors.

In the first attempt to complete the insolvency process, lenders had rejected the Rs 7,350 crore bid of Lakshdeep, part of Suraksha group, as it found it to be substantially lower than the company’s net worth and assets.

Therefore, the IRP in October 2018 started a fresh initiative to revive Jaypee Infratech on the NCLT’s direction.

In this round, NBCC has promised to deliver flats to home buyers in four years. It has also offered 1,400 acre land worth Rs 6,000 crore as well as Yamuna Expressway highway to lenders.

NBCC has suggested that banks should raise about Rs 2,000 crore against the expressway and provide half of the amount (Rs 1,000 crore) to the PSU, which will utilise this fund as an upfront payment. NBCC will also fund the gap of about Rs 1,500 crore between estimated construction cost and receivables from customers.

In contrast, Suraksha group has made an offer of about Rs 20 crore as upfront payment and land worth Rs 5,000 crore, sources said. The Mumbai-based group has promised to complete pending projects in three years.

The realty firm has an outstanding debt of nearly Rs 9,800 crore, of which Rs 4,334 crore pertains to IDBI Bank. Other lenders are IIFCL, LIC, SBI, Corporation Bank, Syndicate Bank, Bank Of Maharashtra, ICICI Bank, Union Bank, IFCI, J&K Bank, Axis Bank and Srei Equipment Finance.

Jaypee Infratech is developing about 32,000 flats, of which it has delivered 9,500 units. JAL had submitted Rs 750 crore in the registry of the Supreme Court for refund to buyers. However, this amount was transferred to NCLT as per an order of the apex court.

The Business Standard reported

ET: SC orders status quo in Emaar MGF Land’s insolvency case

28 February 2019: The Supreme Court on Tuesday ordered all parties involved to maintain status quo in the case related to the insolvency of Emaar MGF Land.
The order comes after home buyers through their counsel advocate Aditya Parolia and advocate Piyush Singh filed an appeal before the apex court. “We moved to SC after Emaar started making exorbitant demand to home buyers in lieu of the order it received from NCLAT on February 1, 2019,” said Parolia.

On January 24, 2019, NCLT-Delhi initiated corporate insolvency resolution process (CIRP) against Emaar MGF Land. However, on February 1, 2019 Hadi Mohd Taher Badri, director of Emaar MGF Land, moved National Company Law Appellate Tribunal (NCLAT) informing them that they have settled the case with the home buyer which filed the insolvency case.

Badri further appealed that since the insolvency resolution professional has not yet formed the committee of creditors and has not issued any public announcement, it should also be disposed off.

Home buyers, however, pleaded that the company should settle the case with all the buyers and not just one.

NCLAT on hearing both the petitions allowed Emaar MGF Land one chance to settle the case with the buyers. It also ordered the IRP to not issue any public announcement or constitute the committee of creditors until further order.

“Emaar however misinterpreted the order and sent emails to home buyers to take possession after clearing their exorbitant demands,” said Parolia. Hence we moved to SC, he added.

The Economic Times reported

BS: Jet Airways slides deeper into distress, now left with only 83 aircraft

28 February 2019: As lenders and promoter Naresh Goyal continue to disagree on the terms of recapitalisation of Jet Airways, the airline is sliding slowly deeper into distress every day. The airline, which started the winter schedule with 103 planes, is now down to 83. 

Dublin-based aircraft lessor AerCap has issued a termination notice for at least two Boeing 737 aircraft, said people in the knowledge of the development. This is the first instance when a lessor has terminated the lease agreement with the financially distressed carrier.

GECAS, GE Capital’s leasing firm, too, has stopped delivery of Boeing 737 Max.

The sources said that lessors were getting impatient after the company failed to furnish a repayment plan by 21 February as proposed earlier.  “Jet Airways hasn’t paid lease rental for the last five months. In January, the management led by Naresh Goyal had said a firm payment plan would be submitted by February 21 but that didn’t happen, following which multiple lessors grounded the planes. Other lessors also are likely to process termination,” said a person aware of the development. He added that five more planes are likely to be grounded by the first week of March, bringing down the fleet size to 78.

According to the airline’s disclosure to the stock exchange, around 15 planes have been grounded by lessors due to non-payment.  Jet Airways has been forced to cancel at least 90 flights from its bigger hubs in Mumbai, Delhi and Bengaluru. These include international flights to Dubai and Singapore.

In response to a query, a Jet Airways spokesperson refused to comment on the number of operational aircraft but accepted that the airline has readjusted its network due to the grounding of planes. “Jet Airways cannot comment on individual relationships. Jet Airways has proactively undertaken certain adjustments to its flight schedule, keeping in mind the likely yet interim non-availability of some aircraft in its fleet in the foreseeable future,” the spokesperson said.

A senior official of the Directorate General of Civil Aviation (DGCA) said that the airline has requested to cut multiple flights for which permission has been given. “Looking at the current situation, the DGCA has agreed to allow Jet Airways to fly a truncated schedule. If we don’t allow the airline to take forward bookings, the company will die which no one wants,” he said.

Running out of fuel

Jet started winter schedule with 103 planesCurrently, the airline is operating 83 aircraftAround 15 planes have been grounded by lessors due to non-payment The company was unable to give payment plan by February 21.

The Business Standard/ Smart Investor reported

DNA: Viceroy Hotels to undergo forensic audit as Arcil smells foul play

28 February 2019: Troubled Viceroy Hotels, which runs JW Marriott and The Courtyard in Hyderabad, would be subjected to forensic audit at the insistence of Asset Reconstruction Co (India) Ltd (Arcil). This is likely to push back the resolution of the firm, one of the first prominent hospitality assets that were referred to the National Company Law Tribunal (NCLT) for insolvency proceedings.

The resolution professional had earlier rejected a demand for a forensic audit of the books of the company on the basis that such a resolution failed to garner minimum votes of 66% at the meeting of Committee of Creditors (CoC).

The Hyderabad bench of NCLT has now ruled that the resolution for appointment of a forensic auditor, which got 59.21% of votes, was valid as it needed to be passed with only a minimum vote of 51%.

Asset Reconstruction Co had earlier dragged Viceroy to NCLT under the Insolvency and Bankruptcy Code for dues of Rs 525 crore. It had asked for a forensic audit of several transactions, including investments in Viceroy Hotel Bangalore and disclosures pertaining to corporate guarantees. The Bengaluru property was transferred to Viceroy Bangalore Hotels Pvt Ltd, in which JP Morgan India Property Mauritius II picked up a significant stake.

The ruling marks a victory for Arcil, which has been engaged in a continued tussle with the resolution professional appointed for Viceroy.

A major contentious issue was the inclusion of Mahal Hotel’s claims worth Rs 318.67 crore by the resolution professional. Mahal Hotel had given advances to Viceroy to acquire the latter’s Chennai hotel property. The deal, inked in 2011, didn’t fructify. The property was subsequently sold to Ceebros Hotels for Rs 480 crore.

Arcil had alleged that Mahal Hotel was hurriedly included among financial creditors even though its dues were operational in nature and that it was done with a purpose to bring down Arcil’s voting share in the CoC to below 50%.

The resolution professional, on his part, has denied the charges including the allegation that he was trying to avoid forensic audit with frivolous reasons.

The delay was more due to Arcil’s change in the stance, he claimed.

While Arcil had earlier demanded an audit of some specific transactions, it later started insisting that a comprehensive forensic audit of books spread over five years be taken up.

NOW CLEAR

  • The RP had rejected a demand for a forensic audit on the basis that such a resolution failed to garner minimum votes of 66% at the meeting of CoC.  
  • NCLT has now ruled that the resolution, which got 59.21% of votes, was valid as it needed to be passed with only a minimum vote of 51%

The DNA reported

BS: Chalet Hotels scouts for distressed assets in hospitality sector

27 February 2019: Chalet Hotels, a K Raheja group firm, is scouting for acquisitions as it seeks to ramp up presence in the hospitality space, said a top company official. 

The developer and asset manager of global hospitality brands, including JW Marriott and Renaissance, are also developing three greenfield hotel projects and a couple of office towers in Mumbai and Bengaluru to tap the burgeoning demand. Chalet has outlined a capital expenditure of Rs 1,100 crore for the projects. 

The Mumbai-based firm, which recently concluded an initial public offering (IPO), has pared its debt to Rs 1,500 crore from Rs 2,600 crore. The capex requirement will be funded through internal accruals and the company will not need debt or equity. The asset developer raised Rs 950 crore through the IPO. It was the second hotel after Lemon Tree to go public in less than 12 months. 

“Acquisition will be an important pillar of our growth strategy. The National Company Law Tribunal (NCLT) has created interesting opportunities,” Sanjay Sethi, managing director and chief executive officer (CEO), Chalet Hotels, told Business Standard. He said a buyout, rather than building projects ground-up, will make better sense as the industry is in the midst of an up-cycle. 

“We believe this is a longish up-cycle, driven by the dynamics of demand and supply,” said Sethi. To be sure, the acquisition will be a marked departure in strategy for the company. So far, it has been expanding by developing greenfield projects. 
With the buyouts, the company is also looking to expand its presence beyond Bengaluru, Hyderabad and Mumbai and have presence in cities like Chennai, Pune and Goa. 

Sethi, however, added that even as there are quite a few assets available below the replacement costs, Chalet will only pursue the ones that meet its criteria of high returns. The assets should add an earnings before interest, tax, depreciation and amortisation (Ebitda) of Rs 40-50 crore each, he added.

Meanwhile, the three greenfield hotel projects underway will add another 588 rooms to its existing portfolio of 2,328. 

Chalet is the asset manager for properties, including JW Marriott, Sahar, Mumbai; Marriott Hotel, Whitefield, Bengaluru, The Westin Hyderabad Mindspace; Four Points by Sheraton, Vashi in Navi Mumbai, and Renaissance. 

Of the three, one will be for Hyatt Regency in Airoli, Navi Mumbai, while the other will be W, a Marriott brand that will come up in the Renaissance Complex at Powai in Mumbai and the third would be a property for Westin in Hyderabad. 
While the Hyderabad property will be operational by April 2021, the ones in Mumbai will commence operations by September 2021.
Chalet is also developing two office towers in Mumbai and Bengaluru with a combined area of 1,100 sq ft. Both will be co-located on the hotel premises and complement the hotels, said Sethi. 

They will be operational by September 2021 and March 2021, respectively. Asset developers always tend to gain during an up cycle and Chalet is well positioned to take advantage, said Deepak Agarwal, an analyst at Phillip Capital. 

He, however, added that, with most its properties already running at 70-80 per cent occupancy, there is hardly any headroom for growth in the top line even as profitability is set to improve owing to appreciating average room rent. 

“The next cycle of growth will kick in once the new properties become operational,” he said. With demand outstripping supply, Agarwal expects the hotel operators to benefit for the next two to three years. 

Sethi is even more optimistic. “We expect the favorable arbitrage between demand and supply to continue for the next five to seven years,” said Sethi, adding that he expects supplies to be in the low-single digit during this period.

The Business Standard reported

BS: Bank of Baroda to sell NPAs worth Rs 6,000 cr, including RCom debt

27 February 2019: State-owned Bank of Baroda (BoB) has floated an expression (EoI) of interest to sell its non performing assets worth over Rs 5,928 crore, including its Rs 1,838 crore loan to cash-strapped Reliance Communications. 

The bank has identified loans to 49 companies, including two power firms run by GVK (totalling Rs 357 crore), GMR Chhattisgarh Energy Ltd (Rs 218 crore), and Monnet Power Company (Rs 199 crore), for sale.     

According to the offer, interested asset reconstruction companies (ARCs), banks, non-banking financial companies (NBFCs), and financial investors were allowed to conduct due diligence of these assets from February 25. Interested buyers will have to submit indicative prices at which they want to buy these assets.  

BoB’s largest asset for sale in this list is the loan to RCom. The bank’s decision to put its assets in RCom on the block comes after the board of RCom early in February decided to opt for debt resolution through the National Company Law Tribunal (NCLT). 

Observers, however, point out that sale of this loan could be a challenge as an interested buyer would ask for a substantial discount, especially as the company’s bid to sell its towers, fibre and spectrum assets has failed.  

RCom’s international bonds worth $300 million have been rated D (standing for default) and are priced at a discount of over 75 per cent of the par value. Many observers say this could be the benchmark for potential bidders for the BoB loan. 

The Business Standard reported