BS: JM Financial files insolvency petition against Hotel Leelaventure

26 February 2019: Hotel Leelaventure on Tuesday said that JM Financial Asset Reconstruction Company Ltd (JMFARC) has filed an insolvency petition against it with the National Company Law Tribunal’s Mumbai bench.

In a regulatory filling, the company said that the JMFARC has filed an application against it under Section 7 of the Insolvency and Bankruptcy Code.

“We further wish to inform you that the company is continuing to engage with prospective investors for a resolution,” it said.

The Business Standard reported

FE: Reliance Communications moves NCLAT for fund release by banks

26 February 2019: Reliance Communications on Monday urged the National Company Law Appellate Tribunal(NCLAT) to direct lenders, led by SBI, to release Rs 260 crore the company got by way of income tax refund, in favour of Ericsson India.

The Supreme Court on February 20 held RCom chairman Anil Ambani and two other directors guilty of contempt for not paying Ericsson India’s dues as per the undertaking given by them.

The court also said that if they failed to pay the due amount of Rs 550 crore within four weeks they will serve a three-month prison term.

On Monday, RCom’s lawyers made a mention of their plea immediately as the NCLAT sat for the day. A two-member NCLAT bench, led by its chairperson justice SJ Mukhopadhaya, agreed to hear the plea and listed it for hearing on February 27.

RCom’s case against Ericsson is pending before the appellate tribunal and therefore the mention was made before it. In May last year, Ericsson had moved NCLT Mumbai bench seeking insolvency against RCom for failing to pay its dues. RCom had then moved NCLAT against Ericsson’s move. Subsequently on February 1, RCom itself decided to go for insolvency and therefore wants to withdraw its appeal in the appellate tribunal.

On February 4, the NCLAT had allowed Ericsson to file its reply on RCom’s plea for withdrawal of the appeals. The appellate tribunal had also directed the company not to sell, transfer or alienate any movebale or immoveable property of the company without the prior permission of the NCLAT.

The Financial Express Reported

BS: Essar Steel Insolvency: NCLT rejects RIL’s plea opposing Arcelor bid

26 February 2019: The National Company Law Tribunal (NCLT) Ahmedabad bench on Tuesday rejected Mukesh Ambani-led Reliance Industries Limited (RIL)’s plea opposing ArcelorMittal’s Rs 42,000 crore takeover bid of insolvent Essar Steel. The tribunal also rejected RIL’s plea to be heard as an operational creditor (OC).

However, the two-member bench, consisting of adjudicating authorities Harihar Prakash Chaturvedi and Manorama Kumari, upheld RIL’s plea by directing Essar Steel’s resolution professional (RP) to consider its claims for dues worth Rs 16 crore.

Ruling that the “application succeeds on partial ground”, the tribunal allowed RIL to approach RP to get its claims registered and resubmitted before the Committee of Creditors (CoC). “The resolution professional is a public servant and must follow the course of natural justice…he should have maintained the claim,” the bench said while reading the operative part of the order orally, even as it directed RP to consider RIL’s claims of Rs 16 crore. 
In two separate pleas, RIL had moved NCLT against Essar Steel. In one plea, it sought repayment of dues worth Rs 16 crore of which Essar Steel’s RP had considered only Rs 99 lakh. In another plea, it also sought quashing of ArcelorMittal’s resolution plan for taking over Essar Steel which now stands rejected. 
The tribunal rejected RIL’s plea on the grounds that, as an OC, RIL was ineligible as its claims worth Rs 16 crore were less than 10 per cent of the total debt.  
Joining other OCs, RIL had moved NCLT seeking dues from Essar Steel as a member of Hazira Area Industries Association for availing additional water supply but failing to pay for the same. As many as 30 OCs, apart from unsecured financial lender Standard Chartered Bank (SCB) had moved NCLT against ArcelorMittal’s bid for Essar Steel.

It needs to be mentioned here that, as per ArcelorMittal’s resolution plan, OCs with claims of more than Rs 1 crore will not get anything out of the Rs 42000 crore while those with less than Rs 1 crore will be repaid in full. 

Essar Steel was part of the original list of 12 defaulters against whom Reserve Bank of India directed lenders to initiate insolvency and bankruptcy proceedings. Essar Steel now awaits an order from NCLT that would either see ArcelorMittal’s bid be approved by the tribunal or liquidation proceedings being initiated against the insolvent steel maker. 

The Business Standard reported

BQ: NCLAT Stays Bharati Defence’s Liquidation Process

26 February 2019: The National Company Law Appellate Tribunal has stayed the ongoing liquidation of Bharati Defence and Infrastructure Ltd.

The NCLAT directed that the liquidator will not take any steps to sell or transfer or alienate movable or immovable assets of the company. The Mumbai bench of the National Company Law Tribunal had ordered the liquidation in January, rejecting the Edelweiss Asset Reconstruction Company’s resolution plan approved by the committee of creditors.

Edelweiss ARC, which initiated the insolvency process against Bharati Defence in June 2017, was the lead financial creditor and also the successful bidder. The resolution professional had rejected the other four offers citing non-compliance.

But the NCLT rejected Edelweiss ARC’s plan on the grounds that it did not envisage infusion of fresh funds, provided for payment to operational creditors only in a phased manner, did not allocate any amount towards statutory dues, and extinguished employees and workmen rights.

The NCLT also concluded that the resolution professional and the CoC failed to ensure appropriate checks and balances and didn’t implement the ‘Chinese wall’ concept during the insolvency process. Since EY had advised Edelweiss ARC and provided investment banking services to the CoC, it created a conflict of interest, the NCLT had noted. The tribunal had also taken adverse note of the payment of Rs 4.27 crore to the resolution professional and his team, saying there was no transparency in the fees paid to them.

The resolution professional appealed against the adverse observations in the NCLAT. While the appeal was limited to this aspect, the NCLAT framed another question: whether the NCLT can sit in appeal over the decision of the CoC on viability, feasibility and finance matrix of the resolution plan, and if it is as per the provisions of the Insolvency and Bankruptcy Code, and not discriminatory?

The NCLAT has directed that Edelweiss ARC be added to the case. It will hear the matter on March 29.

The Bloomberg Quint reported

BQ: Government To Blacklist Insolvency Bid Winners If They Don’t Pay Up

26 February 2019: The government will blacklist successful bidders for insolvent firms who fail to pay the bid amount, a senior government official told reporters.

The government may also bar such companies at Request for Proposal or Expression of Interest stage, as amendments in the Insolvency and Bankruptcy law may take time, he said.

This comes after Liberty House, the successful bidder for taking over Amtek Auto Ltd., refused to honor payments to acquire the bankrupt firm. Liberty House had alleged that the process followed during resolution was flawed and that the resolution professional did not share adequate information about the company at the beginning.

The government is focussed on discouraging frivolous bids to ensure that post admission of resolution plans, and consequent spend of time and resources, the bids do not fall apart, Ministry of Corporate Affairs Secretary Injeti Srinivas was quoted as saying in a Confederation of Indian Industry press release. “Performance security and proposed punitive action against frivolous bids are some of the ways the government is approaching to streamline the implementations.”

On Jan. 17, State Bank of India Chairman Rajnish Kumar had said that there needs to be a stiff penalty against bidders who are not serious about the insolvency process, Bloomberg News reported.

The Bloomberg Quint reported

ET: RCom pledges more shares with Axis Trustee, stock falls 8%

26 February 2019: Shares of Reliance Communications fell 8.1% on Monday after Axis Trustee Services, a wholly- owned subsidiary of Axis Bank, said Anil Ambani’s Reliance Group pledged more shares of the telecom company with it. 

The Reliance Group — which had accused L&T Finance and Edelweiss Group of invoking pledged shares of its companies earlier this month, causing a sharp value erosion in their shares — further pledged 8.15 crore shares, or a 2.95% stake, in RCom with Axis Trustee, according to a regulatory filing. Previously the group had pledged 17.25 crore, or 6.24%, of the company’s shares with Axis Trustee. It pledged extra shares to make up for the fall in the value of shares given as security against loans. 

All Reliance Group companies except for Reliance Nippon Life are trading 15-58% lower since February 1. While Reliance Power shares declined 58% since the beginning of the month, Reliance Infrastructure and RCom have both lost 50%. On Monday, shares of RCom closed at ₹6.01 on the Bombay Stock Exchange. 

The trigger for the slump was RCom’s February 1 statement that it would file for bankruptcy as it had been unable to sell assets to repay debt over the past year and a half. The company has debt of about ₹42,000 crore. 

Last week, the Supreme Court held RCom chairman Anil Ambani in contempt for not paying ₹550 crore of arrears to equipment supplier Ericsson, after agreeing to do so in court. It threatened to send him to jail for three months if the company didn’t make the payment within four weeks.

The Economic Times Reported

BS: Lenders awaiting SC order to resolve Rs 10,600-crore Reliance Naval debt

25 February 2019: Indian lenders, who have Rs 10,600 crore exposure to Reliance Naval & Engineering, are pinning their hopes on the Supreme Court on a bunch of petitions filed against the Reserve Bank of India’s February 12 circular. The circular had banned debt resolution and has impacted Reliance Naval’s debt resolution, say bankers.
Lenders said the Shipyard Association of India (SAI) had  moved the SC asking it to quash and set aside the RBI circular. This petition by the SAI will be heard in March along with other petitions. Reliance Naval is a member of SAI. 
Banking sources said they are worried about the company as in fiscal 2018, the company had made a net loss of Rs 956 crore on revenues of Rs 335 crore and promoter’s entire 29.8 per cent in the firm is pledged.
In March 2015, Reliance Infrastructure took control of Reliance Naval (then Pipavav Shipyard) by acquiring the stake of  the company’s founders, the Gandhis. It also announced an open offer to the shareholders of the company to finally raise its stake to 29 per cent.
The ADA group made the acquisition after it saw a huge opportunity in the Indian government plans to give multi-billion dollar orders for defence ships and submarines under its Make-In-India programme. But as the company failed to deliver its ships in time and cost overrun, its financial metrics deteriorated. With RCom filing for bankruptcy in February 1, the share price of Reliance Naval has also declined.
In its December quarter results, the I company blamed the downtrend in the shipbuilding industry globally and lack of new orders in commercial shipbuilding and oil & gas sectors for its woes. It said even in the defence sector, the process of awarding contracts has been deferred due to several reasons.  This has resulted in financial constraints due to losses in the operations. erosion of net worth and calling back of loans by the secured lenders.
The Business Standard reported

NIE: ArcelorMittal says facing ‘risks’ like excess capex on proposed Essar acquisition

25 February 2010:ArcelorMittal Monday said it is staring at various risks including excess capex and delays in achieving commercial objectives in view of its proposed acquisition of debt-laden Essar Steel India.
The world’s largest steelmaker ArcelorMittal’s takeover proposal of the Essar Steel India Ltd (ESIL), via a joint venture with Nippon Steel & Sumitomo Metal Corporation (NSSMC), in a bankruptcy resolution process has been approved by the committee of creditors (CoC) and is pending before the National Company Law Tribunal (NCLT).
“Should the Resolution Plan be implemented, as is currently expected, it would subject ArcelorMittal to various risks. On the operational front, the industrial project to turnaround ESIL and further improve operational profitability is large-scale and ambitious,” ArcelorMittal said in its annual report released today.
It said while the company has “substantial experience in turnaround situations”, the scale of this one is particularly large and it is the company’s inaugural large-scale acquisition in India, an emerging market.
“Capital expenditure in excess of budgeted amounts, delays and difficulties in achieving commercial objectives therefore cannot be ruled out,” the company said.
The risks in this respect are compounded to an extent by the fact that ESIL is emerging from bankruptcy and it will be owned and operated by a joint venture with attendant risks around strategic alignment, potential discord and deadlock, the report underlines.
“On the financial front, there are uncertainties and risks in respect of ArcelorMittal’s exposure (via equity investment in the joint venture and possible guarantee of the joint venture’s debt),” it said.
While ArcelorMittal and NSSMC currently expect to finance the joint venture through a combination of partnership equity (one-third) and debt (two-thirds), the exact ratio has not yet been determined, and the nature of the long-term debt financing of the joint venture has not yet been defined including, whether and/or what amounts will be guaranteed by ArcelorMittal and NSSMC, it added.
Pending the implementation of long-term financing, ArcelorMittal will guarantee any amounts drawn by the joint venture under the bridge financing, it said.
“The JV’s proposal, set out in a resolution plan detailing among other things the amount to be paid to existing creditors and towards capital infusion (totaling USD 6.8 billion and including approx USD 340 million of guaranteed working capital adjustment) and the improvements and related capital expenditures (totaling USD 2.8 billion) to be made over the medium-term, has been approved by the creditors’ committee and is pending final judicial review,” it said.
The company said it provided a USD 567 million performance guarantee in connection with the execution of the resolution plan.
Initial financing for the debt repayment and equity infusion has been secured through a USD 7 billion term facility (or bridge financing) agreement, it added. Essar Steel owns a 10-million-tonne steel mill in Gujarat.
ArcelorMittal is the world’s leading steel and mining company, with a presence in 60 countries and an industrial footprint in 18 countries.
The New Indian Express reported

BS: ABG Shipyard’s committee of creditors votes in favour of liquidation

25 February 2019: ABG Shipyard’s committee of creditors has voted in favour of liquidation of the company, according to a written submission made on Monday at the National Company Law Tribunal (NCLT) Ahmedabad Bench. The exact voting pattern could not be ascertained.

Sources said though the decision was not unanimous, the voting was above statutory limit. The lenders have opted for liquidation after rejecting two successive bids by London-based metals player Liberty House group. Sources said the rejection of Liberty House’s bid was primarily on the basis of commer­cial concerns.

The matter will be heard on Wednesday by a two-member Bench.

The Business Standard reported