HBL: Goyal may lose control of Jet, but eyes deal for a comeback

13 March 2019: Naresh Goyal may soon lose his controlling stake in Jet Airways but is pushing for a deal that would allow him to make a comeback in the future.

According to sources, while Goyal’s stake in the airline will come down to 17 per cent, he wants lenders and joint venture partner Etihad to leave the door open for him to buy back shares. “The draft agreement between all parties has put a cap of 22 per cent on promoter stake. Goyal wants the cap removed so that he can claw his way back once the financial crisis blows over,” said a source close to the development. The draft agreement also has a non-compete clause which means Goyal will not be able to invest in any other airline or start a new venture in the same space for three years.

Santsh Hiredesai, Research Analyst with SBI Small Caps, said: “If there is a cap of 22 per cent on the promoter shareholding, he will never be able to invest in the company to own a controlling stake.”

Dhiraj Mathur, partner and leader National Aerospace and Defence Practice at PWC, said, “It is understandable for someone who has built a company to not want his stake to be perpetually below 22 per cent but what’s also needed to be understood is that there are other lenders, and partner airline who might want to protect their stake in the company as well and, thus, the cap has been suggested.”

Nicolas Dumoulin, Managing Director of career advisory firm Michael Page, said globally it is common for companies under stress to change the promoter. “Apple is one such company where the founder was asked to leave. It’s pretty common in companies where external funding comes in, the shareholders then start to look at the profit of the company and not the promoter. The moment the company is not in the best shape it makes it difficult for the existing promoter to stay on.”

But will a comeback by Goyal be good for Jet Airways? Jobs’ return certainly helped Apple.

Meanwhile, Jet Airways has grounded five more aircraft on account of non-payment of dues to lenders.

According to Jet Airways’ website, the airline has 119 aircraft, BusinessLine had reported that over 40 per cent of its fleet was not operating. This is the fifth time in a month the airline has grounded flights.

The Hindu BusinessLine reported

BS: Tata Steel BSL prepays Rs 3,000 crore loan riding on massive turnaround

13 March 2019: Tata Steel’s acquisition of a heavily indebted Bhushan Steel (BSL) mill has changed the fortunes of the beleaguered facility and helped it prepay a Rs 3,000-crore loan.

The development comes after the plant witnessed a significant improvement in its financial and physical performance in the last 10 months under Tata Steel management, sources said. 
Bamnipal Steel (BNPL), a wholly-owned subsidiary of Tata Steel, had acquired BSL in May 2018 at a cost of Rs 35,200 crore under the Insolvency and Bankruptcy Code. 
To finance the acquisition, Tata Steel through BNPL had insured Rs 16,500 crore loan, in addition to extending another Rs 18,500 crore of inter-corporate loan totalling Rs 35,000 crore, of which the company has now prepaid Rs 3,000 crore, sources said.
Besides, Tata Steel BSL, the new name of the acquired entity, has refinanced a short-term acquisition financing, with around Rs 15,500 crore of long-term loans, which has improved the risk profile of the company and set in place the long-term balance sheet of the entity. This Rs 15,500-crore is part of the refinancing of the bridge loan. The balance Rs 35,000-crore loan is now being converted into preference shares for which shareholders’ approval was obtained this week. 

The credit rating of the unit has been upgraded to AA for the long term and A1+ for the short term by CARE Ratings, which is expected to reduce the finance cost, leading to better capital creditworthiness.

Among other signs of financial improvement, the earnings before interest, tax, depreciation and amortisation (Ebitda) of the company increased from Rs 1,442 crore in the nine months of 2017-18 to Rs 3,013 crore in the same period this year, while the Ebitda margin has gone up by 8 per cent year-to-date of 2018-19 (FY19), compared to a similar period last year. 

The turnover of the company has jumped to Rs 15,374 crore in the first nine months of the current financial year, from Rs 12,908 crore in the previous year — an improvement of 19 per cent. 

Tata Steel BSL is currently focused on reaching full capacity through decoupling and debottlenecking of existing facilities. The estimated time for the ramp-up would be 24 months. “We are also focusing on improving maintenance and safety practices at the plants, which will help in ramp-up volumes,” said a senior officer of the company.

With hot metal production at 3.1 mt in the first nine months of FY19, the company is on its way to cross 4 mt hot metal output for the first time since its inception this year. Similarly, crude steel (3.1 mt) and hot-rolled coil (2.9 mt) have shown 14 per cent and 16 per cent rise in production, respectively, in the same period this financial year.   

“We have adopted three-tier integration plans i.e., excellence, elevate, and expand. In Phase 1, we are working towards stabilisation of the plant, debottlenecking of existing facilities, raise it to the best demonstrated performance, and realise synergies. In Phase 2, we plan to achieve benchmark performance in all areas to achieve rated capacity and generate strong cash flows. In Phase 3, we plan to initiate strategic capital investments to ensure sustainable returns for the stakeholders,” said a company official.

The Business Standard reported

B&B: Public Sector Bank initiates insolvency proceedings against State Trading Corporation

13 March 2019: The NCLT Principal Bench has issued notice issued to Government-owned, State Trading Corporation (STC), in a filing made by Syndicate Bank in its capacity as a financial creditor.

STC is an international trading house owned by Government of India. It trades in a variety of products ranging from agricultural commodities to manufactured product. It has availed various credit facilities from 6 banks – Syndicate Bank, IOB, Exim, BOB, UBI and Indian Bank.

STC’s account was declared as an NPA on 31.3.2018 due to non-service of interest due since December 2017. As on 31.12.2018, outstanding balance, owed by STC to Syndicate bank, is approximately 700 crores. After being declared as an NPA, Syndicate Bank also wrote to the Ministry of Commerce and Industry alleging that STC is routing the transactions to other banks, which is in contravention of RBI guidelines.

While several insolvency applications have been filed against Public Sector Undertakings in the recent past,  none were admitted barring West Bengal Essential Supplies Commodities Corporation. This particular application is unique since it’s a public sector bank filing against a public sector undertaking, essentially making it a government dispute inter-se.

A 1,955 crore suit against STC is already pending at DRT, filed by Syndicate Bank along with 5 others. The DRT-II, Delhi issued notice to STC on February 8, 2019, with interim directions and restrained STC from dealing with or disposing of secured assets over which security interest is created.

Advocate Hitesh Sachar, Partner at Canpisce & Co is appearing for Syndicate Bank.

Bar & Bench reported

BS: NCLAT to hear Essar promoters’ plea against ArcelorMittal plan on Thursday

13 March 2019: The National Company Law Appellate Tribunal (NCLAT) will on Thursday hear a petition moved by promoters of Essar Steel India against the National Company Law Tribunal (NCLT)-Ahmedabad’s judgment approving ArcelorMittal’s resolution plan for debt-laden Essar Steel.

The NCLT-Ahmedabad had on March 8 approved ArcelorMittal’s Rs 42,000-crore takeover bid for debt-laden Essar Steel.

Three directors of Essar Steel had mentioned the issue on Monday before a two-judge Bench headed by Chairman Justice S J Mukhopadhaya. The Bench had asked the matter to be listed after the full written order of NCLT-Ahmedabad was uploaded.

The three directors of Essar Steel are Prashant Ruia, Dilip Oommen, and Rajiv Bhatnagar.Apart from the directors, dissenting financial creditor Standard Chartered Bank (StanChart) had also approached the NCLAT on Monday.

StanChart had alleged it was being discriminated against by the committee of creditors (CoC) of Essar Steel as it had been allotted a very less value against its claim. The allegation was, however, rejected by the CoC, which had told NCLT-Ahmedabad that the bank was, in fact, getting two times its share. Essar Steel had defaulted on its guarantee for StanChart’s loan to its Mauritius-based subsidiary Essar Steel Offshore worth Rs 3,700 crore.

ArcelorMittal’s bid for the company includes an upfront payment of Rs 42,000 crore towards the debt resolution of Essar Steel, with an additional Rs 8,000 crore of capital infusion into the company to support operational improvement, increase production levels, and deliver enhanced levels of profitability.

In October 2018, the CoC of Essar Steel had voted to approve ArcelorMittal’s plan and a letter of intent was issued.

The Business Standard reported

BT: NCLAT reserves order on RCom plea to release of income tax refunds

13 March 2019: The National Company Law Appellate Tribunal on Wednesday reserved its order on a petition by Reliance Communications which has approached the tribunal seeking the release of income tax refunds to clear dues of Ericsson.

Lenders of RCom have opposed the plea.

After hearing both the sides, the NCLAT bench headed by Chairperson S J Mukhopadhyay reserved the order in the case.

Senior lawyer Kapil Sibal appearing for Anil Ambani-led Reliance Communications appealed for payment to be made to Ericsson from the trust and retention account held by SBI under which assets of telecom firm have been mortgaged.

Senior lawyer Neeraj Kishan Kaul appearing for SBI argued for rejection of the RCom’s appeal, contending that it will lead to outgo of public money for settling payment of a private party.

He said that RCom asset monetisation deal failed because Reliance Jio refused to take responsibility of past dues of the Anil Ambani-led firm before the DoT and hence it is not liable to make payment on behalf of RCom.

RCom has been asked by both the Supreme Court and the NCLAT to pay Rs 550 crore to Ericsson.

The company has paid Rs 118 crore to Ericsson and if it fails to pay the rest of the amount then RCom group Chairman Anil Ambani may have to face jail term for the contempt of court order.

Business Today reported

BT: The NCLT has questioned the manner in which withdrawal of the insolvency proceeding was carried out.

13 March 2019: The Mumbai bench of the National Company Law Tribunal (NCLT) has raised suspicion over the manner in which the insolvency proceedings against Streling Biotech have been withdrawn. 

In an observation made yesterday, NCLT has asked the central government to look into the matter and see if it wants to make any representation against the withdrawal before the tribunal could pass any further order.

The NCLT has questioned the manner in which withdrawal of the insolvency proceeding was carried out. 

It says while the promoters of the group — Nitin Sandesara, Chairman and Managing Director and Chetan Sandesara, Joint Managing Director — are absconding and government agencies like Enforcement Directorate, CBI and other agencies have failed to track them down, yet the lenders accepted the proposal of one-time settlement from the promoters.

That is not all, observed the NCLT. The proposal of one-time settlement (OTS) came from a person named Farhad Daruwalla on behalf of Sandesara Group. However, it is not mentioned in the OTS proposal if the Sandesaras authorised the said person to submit the one-time settlement proposal.

The tribunal also pointed out when the resolution to withdraw the insolvency proceeding was cleared by the committee of creditors (CoC), the insolvency resolution professional (IRP) had asked the CoC for details of the OTS proposal, sources of funds of the debtor (for one-time settlement) and if the proposal met the RBI norms.

The CoC led by Andhra Bank (which initiated the insolvency proceedings against Sterling Biotech) said that the details would be directly given to the NCLT and did not submit any details with the IRP.

It is to be mentioned here that the resolution to withdraw the insolvency proceeding against Sterling Biotech could not get the mandatory 90 per cent CoC votes during the 13th meeting of CoC on February 27 this year. After that, the IRP put the resolution proposal from ACG Associated Capsules Pvt Ltd for vote, which was also rejected by 93 per cent CoC votes. Then the IRP put the proposal for liquidation, which was again rejected by the CoC. 

When a fresh proposal for withdrawal was brought by Andhra Bank, it was finally accepted by the CoC by 90 per cent votes.

It is to be noted here that the Enforcement Directorate has filed a prosecution complaint against Nitin Sandesara, Chetan Sandesara and two of their associates –Dipti Sandesara and Hitesh Patel — in a money laundering case involving bank fraud of Rs 8,100 crore.

Investigation in ED revealed that the promoters of Sterling group laundered the proceeds of crime through various layers and routed the funds outside India. They incorporated more than 100 entities abroad in various countries including UAE, USA, UK, BVI, Mauritius, Barbados, Nigeria etc. Their main entities outside India include Richmond Overseas, Sunshine Trust Corporation, SEEPCO BVI, SEEPCO Nigeria, Atlantic Blue Water Services Pvt Ltd. etc.

Business Today reported

ET: Refuse to believe RCom will let Anil Ambani go to jail, says SBI

13 March 2019: State Bank of India, the main lender to debt laden Reliance Communications (RCom), told an appellate tribunal Wednesday that it “refused to believe” that the telco will let its chairman Anil Ambani go to jail contempt of court, and will ultimately pay Ericsson by the March 19 deadline, even without the income tax refunds.

Arguing for SBI in the National Company Law Appellate Tribunal (NCLAT), senior counsel NK Kaul reiterated that RCom had no right to have its dues paid by the Rs260 crore “public money” held in the trust and retention account and argued that the 118 crores for payments to Ericsson had already come from related companies and other sources.

RCom needs to pay Ericsson Rs 453 crore – out of its Rs 571 crore dues – by March 19, else its chairman Anil Ambani will go to jail for three months. RCom has already paid Rs 118 crore.

“I refuse to believe that the chairman of this company will be allowed to go behind bars and they will not pay up the money.” said Kaul.

When the two-member bench led by Justice SJ Mukhopadhaya quizzed Kapil Sibal, senior counsel for RCom, on how the telco would raise the remainder of the dues to Ericsson if the tax refund of Rs 260 crore was released, Sibal said, “We will see what we can borrow from the bank or something like that”.

RCom moved NCLAT, seeking directions to the 37 lenders, including lead lender SBI, to release Rs260 crore that has been refunded by the IT department directly to Ericsson. Lenders have refused to do so, saying public money can’t be used to settle payment to a private party. NCLAT has warned that it would order a revival of insolvency proceedings in the National Company Law Tribunal (NCLT) against RCom if Ericsson wasn’t paid on time.

“If the logical order is that (there be) a revival of insolvency proceedings, then so be it,” Kaul said. NCLAT Wednesday reserved its order.

Incidentally, RCom also wants to revive insolvency proceedings against itself, and has separately moved the NCLAT to vacate the stay on NCLT’s ruling admitting such proceedings against the telco. This, after its move to sell assets, including spectrum, to Reliance Jio was stymied by a slew of legal cases. RCom has said it had banked upon this deal to pare its over Rs40,000 crore debt.

“Let it go for insolvency. So far as banks are concerned. we can’t do anything for sale (to Jio). We don’t have a buyer available with us. The other telecom operators who had bid, there was difference of more than 70% between the bid of RJio and the other mobile telecom operators,” said a counsel for some RCom lenders, who did not wish to be named.

Justice Mukhopadhaya cautioned that if insolvency proceedings are resumed, then all payments made to Ericsson after the order of the NCLAT staying insolvency proceedings, and funds held in the trust and retention account for lenders would have to be refunded to the insolvency professional.

Sibal argued that lenders had earlier agreed to paying Ericsson’s dues from the sale of spectrum that was mortgaged to lenders.

“They are talking about public money being used for a private settlement and they themselves agreed to it with respect to the sale spectrum that is mortgaged to them” said Sibal

The Economic Times reported

BS: RBI defends Feb 12 circular in SC, says no plan submitted by companies yet

13 March 2019: Reiterating its stand on the February 12 circular, the Reserve Bank of India (RBI) on Tuesday said that the stressed accounts which were affected had not yet come up with a resolution plan, despite ample time having been given to them. In its submissions before the Supreme Court (SC), the regulator said that if the companies were ready with a plan, they should place it before the court.

“Let them place the plan before the court. The banks are here and they can consider it. We can give 15-30 days,” the counsel appearing for RBI said. The banking sector regulator was responding to the power and sugar companies’ allegations that the February 12 circular was based on a ‘one-size-fits-all’ approach without considering the specific problems of the sector.

The 180-day deadline, the RBI counsel said, had passed in September and yet no resolution plan had come from them. The debtors could have not been given infinite timelines, the RBI counsel said.

On February 6, the power companies had told the top court that the circular asking banks to move insolvency petitions against large non-performing assets (NPAs) that have not been resolved was based on a ‘one-size-fits-all’ approach without taking into consideration factors such as the reasons for non-payment.

There is no distinction between the kinds of debtors, the reasons for non-payment of the debt, or consideration for external factors influencing the sector, senior advocate Abhishek Manu Singhvi, appearing for one of the power companies had told the court.

In its submissions on Tuesday, RBI rejected this allegation and said that neither it nor the banks took such an approach. They instead took note of the individual problems of the companies under each sector and decide accordingly, the RBI counsel said.

“The sector issues may be pertinent. When the banks restructure such loans, all issues of the sector are taken into consideration. But there were many ways of resolving. RBI circular nowhere says to proceed one way or other,” he said.

The banking regulator also flayed the challengers to its February 12 circular arguing that the problems in the respective sectors had not cropped up overnight. The companies, RBI said, were best situated to know the issues of their sector, the global and national position of the industry, and other economic hindrances.

“If they had reached an agreement with the banks, as they claim, they could have approached the National Company Law Tribunal (NCLT) and informed it that they were confident of finding a way. It would have been up to the NCLT to decide on that,” the RBI counsel said.
Some of the power and sugar companies who have challenged the circular have alleged that they had almost completed the negotiation with the banks when the RBI circular came which forced the banks to withdraw from the table.
A two-judge Bench of Justice Rohinton Fali Nariman and Justice Vineet Saran is hearing a bunch of petitions moved by power, sugar, and shipping companies challenging the RBI’s circular. On February 12, the RBI had asked banks and other lenders to either execute a resolution plan for big stressed accounts or file insolvency petitions against them in the NCLT.
The court is hearing these petitions by dividing them into three categories. There are some companies that have challenged the validity of the Insolvency and Bankruptcy Code. The second group of companies have challenged the constitutional validity of the circular, and the third group, which consists mostly of power companies, have sought temporary relief from the circular only for themselves.

BQ: StanChart May Wind Up Losing Less on Its Biggest Indian Bad Loan

13 March 2019: Standard Chartered Plc may wind up losing less on its biggest bad loan in India.

Lenders to bankrupt Essar Steel India Ltd. will consider increasing a payout to Standard Chartered to expedite the sale of the troubled Indian mill to ArcelorMittal, according to people with knowledge of the matter. That could smooth over a sticking point in months of court battles as the world’s largest steelmaker tries to open shop in the South Asian nation.

Standard Chartered has been seeking repayment on about 35.6 billion rupees ($513 million) of loans to Essar Steel. The steel maker is the highest-profile company among the so-called “dirty dozen” debtors ordered by Indian authorities in 2017 to go through the bankruptcy courts.

  • A committee of creditors to Essar Steel, led by State Bank of India, will consider distributing nearly 30 billion rupees to Standard Chartered and operational creditors, the people said. While the exact amount that would go to the U.K. lender isn’t decided, the amount that the committee had previously agreed to pay the bank was only 600 million rupees, the people said.
  • The move is part of an attempt to complete the sale by the end of March, the people said, asking not to be identified as the information isn’t public.
  • Standard Chartered has filed a plea to India’s National Company Law Appellate Tribunal opposing a decision by a lower court to sell Essar to ArcelorMittal, world’s largest steel producer.
  • Standard Chartered is opposing the sale to ArcelorMittal as it faces losing a substantial part of monies it has extended to Essar under the deal, according to people familiar with the matter. An Indian bankruptcy court last week approved ArcelorMittal’s offer to buy Essar Steel after months of court battles.

Standard Chartered declined to comment, while State Bank of India didn’t respond to an email seeking comment.

The Bloomberg Quint reported

BS: Ramdev’s Patanjali Ayurved ups offer for bankrupt Ruchi Soya to Rs 4,350 cr

13 March 2019: Baba Ramdev’s Patanjali Ayurved has sweetened its offer for bankrupt Ruchi Soya to Rs 4,350 crore as upfront cash to banks. As earlier offered, it will also infuse Rs 1,700 crore into the company.

The revised offer will mean the lenders will have to write off 60 per cent of their dues. Adani Wilmar had reportedly offered Rs 4,300 crore in August last year, but withdrew this January, citing delay in the resolution process. Patanjali’s earlier offer was for Rs 4,100 crore. Adani had proposed an additional Rs 1,700 crore, as Patanjali did, for fund infusion. 

Adani was declared the highest bidder but Patanjali objected, saying its offer was better. A source said the Adani offer was earlier selected as settlement of bank loans has higher weight in the evaluation (of the lenders) than the infusion of funds into the debtor company.

Indore-headquartered Ruchi Soya, once one of the largest processors of edible oils, filed for bankruptcy in December 2017. Its accumulated debt was Rs 12,000 crore; sales had fallen from Rs 31,500 crore in 2014-15 to Rs 12,000 crore in 2017-18.

A banking source said with the revised offer, the stage was finally set for acquisition of Ruchi Soya. It had attracted over two dozen bids. These were from private equity majors KKR and Aion Capital, beside consumer goods entities ITC, Godrej Agrovet and Emami, apart from Patanjali and Adani Wilmar. 

Experts said the firm’s five port-based refining plants were the key reason for bidder interest.

The Business Standard reported