HI: Deccan Chronicle facing serious fund crunch: RP

20 February 2019: Mamta Binani, the Insolvency Resolution Professional for city-based Deccan Chronicle Holdings Limited (DCHL), on Tuesday said that the media house whose flagship brand is Deccan Chronicle daily was facing  financial crisis and as result, salaries were not paid for the past four months.

Making an appeal toRatakonda Murali, Member (Judicial), Court-I of Hyderabad Bench of National Company Law Tribunal (NCLT), to speed up the process of approval of the resolution plan shesubmitted to the court,Binani admitted that it was increasingly becoming difficult for her to run the operations as there was no money. 

“I am not able to run the company as there is no money. Lordship, I have not been able to pay the salaries for the past four months. We have not been paid for the last eight months”, she told the NCLT court.Binani made this appeal when DCHL resolution process case came up for hearing on Tuesday.At this juncture, the Member (Judicial) asked her whether there was no income for the company. For that, she replied: “No income,Lordship. 

Yesterday, employees’ union and others gheraoed me. It is now increasingly becoming life-threatening for me to get inside the office and run the organisation”. She further pointed out that the resolution plan was already two-months old. It may be mentioned here that in December last year, the Committee of Creditors (CoC) led by Canara Bank approved the resolution plan submitted by the Vision India Fund ofKolkata-based Srei Multiple Asset Investment Trust (SMAIT) with over 80 per cent votes. 

However, IDBI Bank, one of the financial creditors, registered its dissent and voted against the plan, saying some banks got disproportionately higher amounts from the proceeds promised by the resolution applicant.The bank which filed an interim application (IA No. 24) with the NCLT court raised objections against higher payments to some banks. Indian Overseas Bank also raised objections against the resolution plan.

Appearing for the Resolution Applicant, advocate Srikanth Hariharn sought some time to file a counter to the interim application filed by the IDBI Bank. The case is posted for hearing on February 28, when all the IAs will be taken up.

The Hans India reported

ET: After IBC war Ruias & ArcelorMittal talk deal for Hazira port & power plant

20 February 2019: Essar Group has discussed the sale of its captive port and power plant in Hazira, Gujarat, for Rs 8,500-10,000 crore with ArcelorMittal, multiple people aware of the discussions said.

In a sign that the London-based steelmaker has gained an upper hand in the race to buy out Essar Steel, a team led by the group’s director strategy and M&A, Vikash Saraf, visited London to negotiate with chairman Lakshmi Mittal and son Aditya for the sale. According to officials present, they were also joined by Prashant Ruia via video conferencing from Mumbai, although this could not be independently verified. 

These two assets are not part of the Essar Steel resolution plan but are essential for the 10 mtpa plant in terms of raw materials and power supply. Both are located in the same coastal complex. 

A team from ArcelorMittal is in Hazira this week for a visit at the port and plant site. “AM and Nippon Steel & Sumitomo Metal are visiting these facilities in light of the planned acquisition of ESIL to understand the supply arrangements for raw materials and power for the steel mill,” an Arcelor-Mittal spokesperson said in response to ET’s queries. 

IBC STRATEGY 

Essar officials, however, say they will continue to contest the Mittals in the bankruptcy courts since they believe their Rs 54,389-crore proposal for withdrawal of Essar Steel from IBC process is better. 

“This proposal offers creditors of Essar Steel 100% recovery of all their dues and is Rs 12,000 crore more than the recovery from the ArcelorMittal resolution plan of Rs 42,000 crore. With full payment of dues of all creditors, there is no need for Essar Steel to remain in the IBC process,” an Essar Steel spokesperson told ET. “We believe that our settlement proposal offers the best possible outcome to all the stakeholders of Essar Steel, and also meets the ultimate objective of the IBC, which is to maximise the recovery to all creditors.” 

Sources close to Essar Group claim that ArcelorMittal is indeed interested in the captive assets and are on a diligence tour at the steel complex on Tuesday but for a “routine exercise and for now, the Ruias are shooting to win”. 

The talks, however, have gathered momentum after last-ditch attempts by the Ruias to salvage their flagship operations by creating an alliance to counter the ArcelorMittal bid floundered, say people in the know.

Following detailed discussions in London in December, it was proposed that Sajjan Jindal-led JSW, Anil Agarwal’s Vedanta and Russian bank VTB would form a consortium and back Essar. As per those preliminary discussions, JSW was to take charge of the core steel making operations and get into an offtake agreement with Vedanta for supply of gas to fire its DRI units. 

Vedanta was to also supply iron ore. VTB and Essar was to take control of the pellet making and beneficiation facilities in Odisha. Essar Group sources added that a tentative 40:30:30 equity arrangement was also conceived. The plans were eventually dropped. 

A Vedanta spokesperson said, “The company categorically confirms that it is not in the process of submitting any revised bid for Essar Steel and as a policy we do not comment on market speculations.” VTB did not respond to ET’s questionnaire and JSW could not be reached for comments. 

INTER-DEPENDENT ASSETS 

The Hazira port and power plant are absolutely crucial to run the steel unit smoothly but they are housed in separate standalone companies. 

Essar Steel Hazira is the country’s largest single-location flat steel plant. The complex also houses a 30 mtpa, all-weather, deep draft, dry bulk port and a 515 mw natural gas-operated power plant. Built at a total cost of more than Rs30,000 crore, Essar Steel Hazira has a steelmaking capacity of 10 mtpa. 

Currently the terminal is operating 4 berths with a total quay length of 1,150 metres with operational draft of 14 metres. The port has a take-or-pay contract with Essar Steel.

In 2017, Essar Bulk Terminal Ltd (EBTL), the operator of the Hazira port terminal facility, had signed an agreement with Gujarat Maritime Board (GMB) for expanding its captive jetty by 1,100 metres.

The expanded berthing facility was scheduled to be ready by end-FY18, to enhance the current capacity by 20 mtpa. This was done not only to help cater to the enhanced cargo requirements of Essar Steel, its anchor customer, but also give a boost to the company’s third-party cargo business, said a company release. 

During the bidding process last year, some suitors of Essar Steel had approached Adani Hazira Port – located approximately 6 km from the Essar Steel plant on the western side of the Hazira peninsula – for an informal commitment for using their port infrastructure to bring in key raw materials like iron ore and LNG as a contingency plan. 

Essar’s steel plant needs 800-900 mw. Currently, Mahan power plant in Madhya Pradesh, a unit of Essar Power, supplies 300 mw. Another 300 mw is generated and supplied by the captive unit in Hazira while the group buys 200 mw from the open market. 

Due to the reliance on Mahan, ArcelorMittal has bid for the Mahan unit as well. The steel major has made an offer of Rs4,800 crore for the 1,200 mw Mahan project, said Power Finance Corporation (PFC) on Monday. Government-owned PFC is one of the lenders to the project. This is part of PFC’s portfolio of stressed assets and it is seeking a one-time settlement for the same.

The Arcelor offer, it said, is higher than Essar Power’s settlement offer of Rs 3,500 crore. ArcelorMittal had also bid for Essar Projects, the EPC division of the diversified group, at a 93% discount.

The Economic Times reported

DNA: Edelweiss ARC salvages Kohinoor project in Mumbai

20 February 2019: In the city’s real estate market which is riddled with incomplete projects, Edelweiss Asset Reconstruction Company is reviving the prestigious Kohinoor Square, a residential-cum-commercial development at Dadar. The project has been mired in litigations and construction was stalled in 2012.

The building, erstwhile Kohinoor mills, was bought by the Kohinoor group (promoted by Unmesh Joshi, son of former Maharashtra chief minister Manohar Joshi), Maharashtra Navnirman Sena chief Raj Thackeray and his business partner Rajan Shirodkar for Rs 421 crore. Thackeray exited the partnership in 2009. Kohinoor CTNL Infrastructure Private Ltd, a subsidiary of Kohinoor group, began construction of the premium residential and commercial establishment in 2009.

This is one of the rare instances where an asset reconstruction company (ARC) has taken over the debt from a clutch of banks and financial institutions to revive an incomplete real estate project. Besides taking over the Rs 1,000 crore debt, the ARC has also provided priority finance to complete the project.

In the next few months, the occupation certificates (OCs) for part of the commercial tower of the project are expected to be handed out. Few lenders like Bank of Baroda and IL&FS own some units in the commercial premise in lieu of unpaid loans.

“First, we bought the debt from various banks. After aggregating the debt, we infused additional finance of Rs 300 crore and another Rs 175 crore to complete the project. In the next few months, a part of the commercial tower of the building will be getting the occupational certificates to be handed over to the investors,” said a source at Edelweiss ARC.

The initial plan was to build a five-star hotel, the largest in Asia. But later on, the plan was revised to have two towers of 52 floors and 32 floors which will have both commercial and residential space. The construction was on schedule but litigation over the floor space index (FSI) in 2012 slowed down the project.

The Rs 2,000 crore Kohinoor project is being completed by Sandeep Shirke And Associates (SSA), a Prabhadevi-based architectural firm. Manohar Joshi’s son Unmesh, who initially owned the Kohinoor Square, lost control of the property which was one of the most ambitious real estate projects in Mumbai to SSA.

Edelweiss Asset Reconstruction company moved the National Company Law Tribunal after Kohinoor group failed to repay a mounting debt of Rs 1,000 crore in 2017. The NCLT court allowed SSA to take over the project after the resolution professional S V Ramkumar proposed the architect’s name.

IN PROGRESS

  • In the next few months, OCs for part of the commercial tower of the project are expected to be handed out  
  • Few lenders like BoB and IL&FS own some units in the commercial premise in lieu of unpaid loans

The DNA reported

FE: Insolvency process: Manoj Gaur offers to clear Jaypee Infra dues of Rs 8,358 crore

20 February 2019: In a last-ditch effort to regain control of the insolvent Jaypee Infratech (JIL), its erstwhile promoter Manoj Gaur has offered to clear dues of financial creditors totalling Rs 8,358 crore out of their admitted claim of Rs 9,783 crore. The amount of Rs 8,358 crore does not include the interest component of  Rs 1,425 crore, on which he has sought a waiver.

The proposal, submitted on February 15, also promises to pay fixed-deposit holders within 90 days of the approval of the offer of settlement. It also hopes to complete the real estate project in four years. Gaur has proposed to pay `412 crore to the operational creditors.

Sources, however, said Gaur’s proposal will not be discussed in the next meeting of the committee of creditors (CoC), scheduled on March 1. As per section 12 A of the Insolvency and Bankruptcy Code (IBC), the applicant can withdraw the insolvency case if 90% of the lenders and homebuyres vote in favour of Gaur’s latest offer.

Gaur has proposed to make an upfront payment of `1,500 crore to the financial creditors and another `2,000 crore, on a later date after raising the amount through convertible debentures. These apart, he intends to swap debt with land with lenders amounting to `4,858 crore.

The CoC of Jaypee Infratech had met on February 18, in which bids from state-run NBCC and Sudhir Valia-promoted Suraksha ARC were discussed.

Sources said NBCC’s bid is better than that of Surakha. NBCC has promised to pay the entire due to the financial creditors initially through an upfront payment of `1,000 crore. On a later date, it would pay `3,000 crore through a land swap deal and the remaining `5,782 crore by giving the lenders 100% stake in the expressway SPV.

Suraksha, on the other hand, has offered to pay `10 crore upfront to the financial creditors and `5,000 crore via swapping debt with land. It would not pay anything to the operational creditors.

However, NBCC has offered to infuse `500 crore to complete the real estate project in four years. Suraksha has also offered to complete the projects in four years, but it would infuse `3,000 crore towards working capital requirements. Manoj Gaur also intends to complete the project in four years and would infuse `1,500 crore for the same.

Lenders to JIL have already approved the proposed evaluation matrix of the bids and the process for request for resolution plan through electronic voting. The National Company Law Tribunal (NCLT) had on August 9, 2017, admitted IDBI Bank’s plea for initiation of the corporate insolvency resolution process (CIRP) against JIL for defaulting on a `526-crore loan. However, a resolution eluded the firm within the stipulated timeframe as lenders were not happy with “too low” bids.

On a writ petition filed by homebuyers, the Supreme Court on August 9, 2018, directed JIL’s resolution professional Anuj Jain “to follow provisions of the insolvency code afresh in all aspects”.

Noting that liquidation of Jaypee would serve no purpose for homebuyers, financial institutions or the promoters, the apex court, exercising power under Article 142 of the Constitution, extended the insolvency process of Jaypee for another 180 days.

Earlier, Lakshdeep, Adani Group and a joint venture between Kotak Investment Advisors and Cube Highways had submitted the resolution plans. Consequently, Sudhir Valia-promoted Suraksha ARC had emerged as the front-runner to acquire JIL. However, in May 2018, lenders to JIL had rejected the `7,350-crore bid by Suraksha as they found it “too low”.

According to a note prepared by IDBI Bank, Jaypee’s largest lender, the company’s actual value stands at `17,111 crore, while its distress value is pegged at `14,548 crore. JIL has `9,000-crore outstanding to various banks.

JIL’s assets include 25,000 apartments that are under construction and 3,000 acre of land parcels, mostly along with the expressway.

DNA: Loan converted into equity can’t be treated as debt: NCLT rules in IVRCL case

20 February 2019: In a judgement that would have far-reaching consequences on the banking sector, National Company Law Tribunal has ruled that loans converted into equity prior to the start of bankruptcy and insolvency process for a company can’t be considered as debt at the time of settling dues of financial creditors.

In the ongoing resolution of the erstwhile construction major IVRCL, Hyderabad bench of NCLT has also ruled that bank guarantees be considered as debt, which would bring relief to the banking system that regularly issues such undertakings to corporates.

Canara Bank in its plea claimed that conversion of debt of erstwhile construction major IVRCL into equity as part of a debt restructuring plan is only an arrangement to attract a strategic buyer and that the dues retain the nature of debt.

The lender argued that such converted equity is not required to be disclosed under Accounting Standard 23, the objective of which is to set out principles and procedures for recognising in the consolidated financial statements the effects of the investments in associates on the financial position and operating results of a group.

“The applicant bank has not been able to show any provision of the scheme under Corporate Debt Restructuring (CDR), Strategic Debt Restructuring (SDR) or any regulations or guidelines issued by the Reserve Bank of India that the amount converted into equity will revert to the category of debt the moment the CDR/SDR fails,” Judge Anantha Padmanabha Swamy said in a 14-page verdict.

Aggregate claims against the Hyderabad-based diversified construction major were arrived at Rs 13,406 crore after accounting for claims from about 38 financial institutions, over 2,815 operational creditors and 3,368 unpaid workers.

Among the major financial creditors, ICICI Bank tops the list with a claim of Rs 913.30 crore, followed by Canara Bank at Rs 899.90 crore.

Canara Bank also claimed that uninvoked bank guarantee of Rs 304.15 crore and Rs 137.33 crore of debt converted into equity be treated as debt. Resolution professional Sutanu Sinha, however, had argued that these were not actual debts and rejected both the claims.

NCLT has now accepted resolution professional’s stand on converted debt but rejected the argument against treating guarantees as debt.

“The order has a far-reaching impact as it clarifies the view of the law on bank guarantees and converted debt as both of these are widely used financial instruments,” Sinha told DNA Money.

Sinha had argued that the action of conversion of debt into equity is irreversible and once having chosen to convert, that portion of the debt is extinguished, and hence there is no claim to be admitted.

NCLT, however, rejected Sinha’s argument on the bank guarantee issue.

“In case the uninvoked bank guarantee is not admitted as a claim, it will be seriously jeopardising the interest of the applicant bank,” the order said.

SHEDDING LIGHT

  • Canara Bank claimed that uninvoked bank guarantee of Rs 304.15 crore and Rs 137.33 crore of debt converted into equity be treated as debt  
  • NCLT has accepted resolution professional’s stand on converted debt but rejected the argument against treating guarantees as debt  
  • It said in case the uninvoked bank guarantee is not admitted as a claim, it will be seriously jeopardising the interest of the applicant bank

The DNA reported