ET: RCom to repay NCD holders only via NCLT

14 February 2019: Reliance Communications (RCom) said the telco and its units will pay principal and interest on non-convertible Debentures (NCD) only post the debt resolution process as directed by National Company Law Tribunal(NCLT). 

“…the payment of NCD shall be in the terms of and subject to the said resolution through NCLT,” said the debt-laden telco in a regulatory filing on Thursday. 

The said NCDs are due to mature on March 1, this year . 

RCom had informed on November 6, 2017, January 5, February 9, 2018 and January 23, 2019 about not fixing any record date for payment of principal and interest on the NCD till completion of restructuring process. 

The Anil Ambani-led operator, which is under a debt of about Rs 40,000 crore, filed for bankruptcy protection in a dedicated court as it’s been unable to sell assets to repay debt over the past year and a half. 

“As announced on 1st February, 2019, the Board of Directors of the Company reviewed the progress of the Company’s debt resolution plans since the invocation of SDR on 2nd June, 2017 and decided that the Company and two of its subsidiaries namely; Reliance Telecom Limited and Reliance lnfratel Limited will seek fast track resolution through NCLT, Mumbai,” the telco said on Thursday . 

It added that “this course of action will be in the best interests of all stakeholders, ensuring comprehensive debt resolution in a final, transparent and time bound manner within the prescribed time of 270 days”. 

The company is currently fighting a legal battle in Supreme Court with operational creditor Ericsson over non payment of dues. in which Chairman Ambani had to appear over contempt of court petitions filed by the equipment maker. 

Shares of RCom closed at Rs 5.54, down by 3.99%, on the BSE on Thursday.

The Economic Times reported

TOI: R-Power drags Edelweiss to HC, but gets no relief

14 February 2019: The Anil Ambani-led Reliance Power (RPower) on Wednesday moved the Bombay high court, seeking to reverse the sale of its pledged shares by the Edelweiss Group. But the court refused to grant any interim relief to the embattled company.

A single-judge bench headed by KR Shriram refused to order the reversal of the sale process or grant any other relief to the company and posted the matter for detailed hearing on Thursday. 

The move follows a war of words between the two companies last week when Edelweiss and L&T Finance had sold pledged shares of R-Power and other group companies, following a steep correction in share prices.

The stock plunge was the result of Reliance Communications (RCom) filing for bankruptcy on February 1. Since then, Reliance Group companies have lost around 70% of their market value. 

The judge said he will hear the petition in detail on merit over other prayers made by R-Power, such as declaring the earlier sale illegal and void and seeking compensation from Edelweiss for the financial and reputational losses following the liquidation of its shares.

In its plea, R-Power said it – along with group company RCom – had pledged some shares of various promoter companies to the Edelweiss Group in lieu of a loan it had taken. 

On February 4, R-Power received a notice from Edelweiss ECL Finance for the sale of its shares by the debenture-holding companies of Edelweiss Group. And the next day, shares worth Rs 5.96 crore were sold. Some shares were also transferred to the debenture holders the same evening by the debenture trustee at a much lower value. 

ECL counsel Janak Dwarkadas said it was well within its rights to sell the pledged shares. Dwarkadas also said in August 2018 that R-Power shares had plummeted and, according to their contract, the company was required to pay an additional 2% interest on the loan. But it refused to pay the additional amount so far.

R-Power counsel Aspi Chinoy, however, argued that according to its contract, a share sale can have been initiated only by the trustee of the debenture holders and not the debenture holders themselves.

The Times of India reported

MC: NCLT should inform real estate regulator before taking up a RERA registered case: Maharashtra RERA chief

14 February 2019: Concerned over the issue of forum shopping by some homebuyers, Maharashtra RERA chief Gautam Chatterjee has suggested that if NCLT decides to take up a real estate case that is a RERA registered project, it should first refer the matter to the respective real estate regulator before it decides to address the issue.

The main objective of RERA is to ensure that pending real estate projects are completed, remove the existing information asymmetry and bridge the trust deficit that exists between homebuyers and developers, he said addressing a seminar on How has RERA Changed the Game for Real Estate at Credai Youthcon 2019.

“Admitting of a case under NCLT means moratorium under section 14 which means for six to nine months nothing in the project will happen. If a project comes under IBC it means it has become insolvent. It may not go under liquidation but experience shows that wherever projects are resolved under IBC, they have been resolved with a haircut of 30 percent to 50 percent. Are we saying that homebuyers, also  creditors, go back home with a 50 percent haircut? RERA expects the house to be completed and given to the homebuyers,” he said.

Therefore, any matter that is being heard by RERA, if it goes to the NCLT and before NCLT decides to admit it, it should be referred to the concerned RERA, who should be given time to resolve it, he said.

“Without making any changes to the Act, the NCLT should be requested not to admit a RERA-registered case right away. It should first ask the concerned regulatory authority to give its opinion whether they are in a position to resolve the case or not. I am a regulator and should get a chance. If RERA is able to resolve the matter within three to four months ‘good’, if not then the NCLT can take it up,” said Chatterjee.

Commenting on the issue of forum shopping, Anthony De Sa, MP RERA chief was of the opinion that it is an established legal principle that for a legal resolution of any kind of dispute, there is one legal path prescribed because parallel paths can result in conflicting judgments and therefore confusion.

“RERA is well equipped to grant compensation for delay and also see that the project gets completed. Therefore, parallel forums should not be allowed,” he said.

KK Khandelwal, Haryana RERA chief, suggested that certain provisions need to be incorporated in the Act that would make the state agencies that are responsible for providing basic services, are also made answerable. “They should be declared as part promoters of the project,” he suggested.

“If state agencies are not doing their job, they should be penalized… if are examining such a proposal. Since EDC is deposited with state agencies and if they are declared as part promoters, they too can be hauled up,” he said.

In his speech, Housing and Urban Affairs minister Hardeep Puri was of the view that if in the implementation of RERA there were “genuine problems, these can be identified without changing the basic character of the new legislation, I think, we should take those on… Let’s realise that this is a new legislation and it has to co-exist with other legislations that have come into being. What supersedes, that is a question which only the passage of time and implementation will show,” he added.

At a meeting held in January this year, real estate regulators of different states, officials from the housing ministry, representatives from the developer community, had pushed for barring consumer forums from taking up disputes relating to real estate issues. They had also suggested that Rera authorities should be given the chance to resolve the dispute within six months before the insolvency proceedings are invoked against the concerned builder.

“Forum shopping does not mean blocking all other options for homebuyers except one, rather it refers to approaching more than one forum simultaneously. Even before RERA, homebuyers could approach the Competition Commission of India or a file civil suit for refund or go for specific performance or approach the criminal court besides the consumer court. Similarly, even now homebuyers should have the choice to approach either RERA or any other forum such as consumer forum (available in every district) or even the NCLT and it is necessary to understand that RERA has to co-exist with other laws,” said Abhay Upadhyay, president of Fight for RERA, an umbrella body of homebuyers.

Moneycontrol and CNBC TV18 reported

BS: Essar Steel case: NCLT concludes hearing on Arcelor’s plan, reserves order

14 February 2019: The stage is set for a landmark order by the bench of the National Company Law Tribunal (NCLT), on approval or rejection of the Rs 42,000-crore takeover bid by ArcelorMittal of insolvent Essar Steel. 

With the marathon hearing having concluded, on the bid and objections by several parties against it, the tribunal has reserved the matter for its order. Meantime, written submissions from all sides —including ArcelorMittal, the Committee of Creditors (CoC) and the Resolution Professional (RP) — have been invited by the coming Monday. 
Part of the original list of 12 major defaulters in which the corporate insolvency resolution process (CIRP) was initiated under the Insolvency and Bankruptcy Code (IBC), the Essar Steel case has prolonged for 570 days. The hearing concluded on Thursday with the RP, CoC and ArcelorMittal making their final arguments and clarifying their stance on financial and legal concessions sought by the latter as part of its resolution plan. 
The RP’s counsel told the bench of Harihar Chaturvedi and Manorama Kumari that ArcelorMittal’s bid had been verified and found to be compliant with the IBC rules and the October 2018 order of the Supreme Court (SC). 

Seconding the RP, legal counsel for the CoC said the lenders’ panel had considered both Vedanta and ArcelorMittal’s bids on the basis of the SC’s order and found the latter’s bid the “best available plan”. ArcelorMittal’s counsel told the tribunal its bid had complied with all directions by the courts and the IBC norms. Nor was its resolution plan contingent on certain concessions in terms of tax accrual and other items it had sought from the tribunal.

NCLT also dismissed a new plea from Essar Steel Asia Holdings (ESAHL), the promoters of Essar Steel India, seeking a copy of ArcelorMittal’s resolution plan as shareholders of the company. The tribunal held the  plea could not be entertained, on the lines of its previous order where it had dismissed their offer of Rs 54,000 crore as a settlement plan for Essar Steel. The tribunal had earlier found ESAHL’s proposal to be non-maintainable and said there was no illegality or irregularity in the CoC’s decision to not consider it.
Karur Vysya Bank (KVB) was asked for written submissions on its plea against ArcelorMittal’s plan. The bank had petitioned to seek dues worth over Rs 3 crore accruing out of KSS Petron, in which ArcelorMittal was a related party. However, counsels for the CoC and the RP had objected that the bank was too late, its claims having been accepted by KSS Petron’s RP after the SC deadline of October 18. This last date was for both ArcelorMittal and Vedanta to pay off their dues, the CoC told NCLT. “It is only on October 19, 2018, that KVB applies for its claim with KSS Petron’s RP, which the latter accepted on October 31,” the CoC said, adding the bank should now approach the apex court and not the tribunal. However, the NCLT said it would pass an order, based on the bank’s written plea.
On Wednesday, the bench had reserved for its order the matter of Essar Steel’s suspended management seeking a copy of ArcelorMittal’s resolution plan, invoking a right to comment on this. It also reserved for order the petitions filed by operational creditors, unsecured financial creditor Standard Chartered Bank  and some firms seeking operational claims. 

TOI: Brookfield to carve Leela into new co

14 February 2019: Brookfield Asset Management, one of the world’s top infrastructure and real estate investors, is nearing a deal to acquire most of the assets of the debt-laden Hotel Leelaventure. 

The transaction envisages the separation of all properties — except the luxurious Mumbai unit — from Hotel Leelaventure into a new private company in which Brookfield will own controlling interest, people directly aware of the matter said.

Besides the Mumbai asset, the troubled hotel chain runs a network of eight properties. The listed Hotel Leelaventure will be debt-free (other than the contingency liabilities on the Mumbai property, which is fighting a law suit with Airports Authority of India). The demerged entity will assume a debt of just under Rs 4,000 crore. 

The acquisition, which TOI reported on September 3 last year, is awaiting final nod from one of the lenders. While negotiations have considerably progressed between Brookfield and Leela’s main creditor JM Financial Asset Reconstruction Company, the latter has parallelly moved the company law tribunal to initiate bankruptcy proceedings against the hotel operator. 

JM holds 26% of Leela and controls 96% of its Rs 6,164-crore debt. The promoters, the Nair brothers, own 47% of Leela, but 94% of their stake is pledged. Another prominent shareholder of Leela is homegrown rival ITC with a 7% stake. The deal implies no equity value for Hotel Leelaventure, and the carve-out transaction, which requires shareholder approval, will be keenly watched. The promoter family has been pushing for a deal in the listed company.

LIC has about 3.47%. Retail investors, including NRIs, hold another 11-12% in the company. 

When contacted, JM Financial and Brookfield declined to comment. Hotel Leelaventure CMD Vivek Nair could not be reached for immediate comments. 

Brookfield will keep the Leela brand name and the original promoter family will be associated with the carved-out entity.

Details in this regard are being worked out. All the upcoming properties of Leela, mostly through management contracts, will also be operated by the new Brookfield company. 

If Brookfield acquires Leela, it will be one of the largest investment actions in the hospitality sector. Recently, American rival Blackstone bought the bankrupt Golden Jubilee Hotels, which owns the Trident in Hyderabad and an under-construction Oberoi hotel, which is also in the same city.Blackstone has built a network of five-six hotels and is stringing them together into a hospitality platform.

Global investors like Blackstone and Brookfield have been bullish on commercial real estate with stable yields — rent-yielding office space and shopping malls being the other parts of the story. 

Leela has been hit by losses, debts and competition, among others. The company’s losses for the nine months of fiscal 2019 widened to Rs 89 crore from Rs 7 crore in the same period of the previous fiscal.

Industry trackers said that Leela used high-cost capital to develop new properties, but found it hard to service the debt as returns failed to meet its expectations.

The Times of India reported

ET: New IL&FS Board pushes for asset-level resolution

14 February 2019 : The crisis in the debt-ridden Infrastructure Leasing and Financial Services (IL&FS) is set to be addressed by undertaking asset-level sale process first before putting in place a plan for a single group-level or vertical-level resolution, sources said.

This would mean that IL&FS group’s equity stakes in individual assets such as road, power and renewable energy projects will be sold first as part of the exercise to restore health of the crisis-hit entity. Once this process is completed, options would be explored to resolve IL&FS at vertical and group level.

The asset-level resolution plan, which has also been mentioned in the third progress report finalised by the new board under the directions of Ministry of Company Affairs (MCA) and submitted to the National Company Law Tribunal, has been favoured as it maximizes returns for stakeholders while allows transfer of title free and clear of encumbrances.

The infrastructure giant has already initiated asset-level resolution by putting in block 22 road assets across its domestic road vertical IL&FS Transportation Networks Ltd (ITNL). Expression of Interest (EoI) has also been invited renewable energy projects while process is being finalized to sell group entities such as ONGC Tripura Power Company and IL&FS Paradip Refinery Water Limited.

Process for resolution of some of these assets will have to follow further orders of National Company Law Appellate Tribunal that on Monday lifted moratorium lifted on 22 IL&FS firms and another 139 offshore entities. This has paved the way for resolution of some of these entities as the bar prevented recovery of loan and resolution of these debt ridden subsidiaries.

The asset monetisation programme is being undertaken by IL&FS to reduce its debt burden of Rs 91,000 crore.

Earlier, the IL&FS Board also looked at group level resolution but found it unviable at current juncture as it would have required a significant capital infusion from strong investors. Resolution of verticals such as ITNL, IL&FS Securities Services, IL&FS Environment and Infrastructure Services.

Under the new resolution plan, asset by asset solution would be explored through methods including capital infusion, asset monetization or through resolution arrangement with creditors. Asset level resolution and sale of business vertical comprising a basket of companies or entities such as wind energy projects, completed domestic road projects would be done on similar lines of asset level resolution.

Once the asset-level resolution of each vertical holding company is completed, only then resolution of the vertical may be considered. Also, if resolution of an asset fails, it would automatically be put for being wound up or liquidated.

The IL&FS and group entities are facing serious liquidity crisis and have defaulted on interest payment on various debt repayments since August 27, 2018. IL&FS group on December 18, 2018 had initiated the process for asset monetisation programme and floated tender for this purpose.

The Economic Times reported

MC: Jet Airways Q3 net loss at Rs 587.7 crore; provisional bank-led debt resolution plan approved

14 February 2019: Distressed airline Jet Airways Thursday reported a Q3 net loss of Rs 587.77 crore, compared to a net profit of Rs 165.2 crore YoY.

At the same time, its quarter-to-quarter losses narrowed, giving the airline much relief. Jet Airways had incurred a loss of Rs 1,297 crore in the second quarter.

The airline’s Q3 revenues from operations stood at Rs 6147.98 crore, as against Rs 6,086 crore a year ago, the company said in a declaration to the exchange.

The release also said that Jet’s lenders, led by State Bank of India, have initiated a comprehensive Resolution Plan under the RBI circular of February 12, 2018.

The resolution plan included infusion of funds, restructuring of debt and monetization of assets, which has been approved by the Board of Directors on February 14, 2019.

The airline had defaulted on its debt repayments in December, and faces a stiff repayment schedule for its over Rs 8,000 crore debt. It needs to repay about Rs 1,700 crore by the end of March. While the company has partly done the scheduled repayment, there are substantial overdue.

High crude in the first six months of the financial year, Rupee depreciation and law fares – due to intense competition – had caused a severe liquidity crunch at Jet Airways. It grounded aircraft, rationalised its sectors and deferred salary payments to its pilots.

For the nine months of the financial year, the company has incurred a loss of Rs 3,208 crore, and has a negative net worth of Rs 10,370 crore. “Also, current liabilities exceed current assets by Rs 9,610 crore,” said the company.

The financial obligations “cast significant doubt on the company’s ability to continue as a going concern.

While it has been in talks with prospective investors, including Tata Sons and Etihad Airways, a deal is yet to fructify. Etihad, which presently owns 24 percent stake in Jet, is learnt to have put down several conditions, including taking over the operations from Naresh Goyal, the chairman.

The company now has scheduled a shareholder meeting for February 21, to seek approval to convert existing debt into shares or convertible instruments. While this will unlock some equity to its lenders, shareholding of both, Goyal and Etihad, will come down.

Resolution plan

Jet’s Board of Directors on Thursday considered and approved a Bank Led Provisional Resolution Plan (BLPRP), which currently estimates a funding gap of around Rs 8,500 crore (including proposed repayment of aircraft debt of around Rs 1,700 crore) to be met by appropriate mix of equity infusion, debt restructuring, sale/sale and leaseback/refinancing of aircraft, among other things.

“The BLPRP will be presented for consideration of each of the following: (i) the consortium of Lenders (ii) the Overseeing Committee of the Indian Bankers’ Association (iii) the Board of Directors of Etihad Airways, and (iv) the Promoter,” the company said.

To improve its financial performance, the company said it is focusing on measures that include revenue enhancement and cost containment, a relook on its network and fleet and resizing the business model.

Money Control reported

 

 

BS: Fin Min on course to meet NPA recovery target

14 February 2019: The Finance Ministry is on course to meeting the NPA recovery target of Rs 1.8 lakh crore by March 31, 2019 with the recoveries already touching Rs 1.08 lakh crore and many big-ticket default cases reaching resolution.

Finance Ministry sources said big ticket recoveries were due this month or in March from Essar Steel and Bhushan Power & Steel which together can fetch over Rs 60,000 crore. Aand they are just a few among the many. Recoveries have already touched over Rs 1 lakh crore in the current fiscal.

Last year, Financial Services Secretary Rajiv Kumar had said that recoveries of about Rs 1.8 lakh crore were assessed by banks which would be from cases under Insolvency and Bankruptcy Code and those outside it.

Public-sector banks recovered Rs 74,562 crore from bad loans in the year ended in March 2018. The state-run banks will focus on recoveries, which will include developing an e-auction portal for auctioning properties seized by the portals.

There is so much urgency among the lenders to recover their dues that not taking any chances of possible delay, SBI had put its entire Essar Steel loan exposure of Rs 15,431 crore on sale though it did not meet the desired response.

In 2019, the NCLT is expected to finalise corporate insolvency resolution process of stressed assets — Videocon Group, Monnet Ispat, Amtek Auto, Ruchi Soya, Lanco Infratech, Jaypee Infratech.

In 2018, over Rs 80,000 crore was recovered from various corporate debtors under IBC, according to the Ministry of Corporate Affairs Secretary earlier. 

In the case of Essar Steel, the Supreme Court has already rejected the pleas of the operational creditors, clearing the deck for ArcelorMittal’s offer which has put up a Rs 42,000 crore bid for the Ruias company. In case of Bhushan Power & Steel, JSW is inching closer to acquiring them with a Rs 19,650 crore offer.

The Ministry has asked banks to monetise their non-core assets and expects assets worth Rs 18,000 crore to be monetised this fiscal but this looks difficult, the sources added.

The Business Standard reported