BS: Tata Steel BSL to allot shares worth Rs 2,300 cr to Tata Steel

25 March 2019: Tata Steel BSL Monday said its committee of directors has approved allotment of shares worth Rs 2,300 crore to Tata Steel on private placement basis.

“We wish to inform you that the committee of directors has today approved allotment of 230,00,00,000 – 8.89 per cent optionally convertible redeemable preference shares having face value of Rs 10 each for cash aggregating to Rs 2,300 crore to Tata Steel Limited (OCRPS Series II) on private placement basis,” Tata Steel BSL said in a BSE filing.

Tata Steel had won the bid to acquire debt-laden Bhushan Steel in an insolvency auction and later renamed the company as Tata Steel BSL.

Shares of Tata Steel BSL ended 4.27 per cent down at Rs 28.05 apiece on BSE Monday.

The Business Standard reported

LM: Govt moves NCLT seeking immunity for directors of IL&FS arms

25 March 2019: The government on Monday filed an application with the National Company Law Tribunal (NCLT) here, seeking immunity for the newly-appointed directors of the subsidiaries of the crippled IL&FS group from any future adverse outcomes.

It can be noted that soon after taking over the company after its defaults and appointing a new board last October, the government had sought immunity to the newly- appointed six directors of the group from any legal action against them for the past deeds of old directors.

“We are issuing a direction that for the past actions of the suspended directors or any of the officers of the company and the past wrongs of the suspended directors and its officials, no action should be initiated against the newly- appointed director, without prior approval of the tribunal,” NCLT Mumbai had said in an interim order on October 5.

The government move came in after it felt that the Uday Kotak led board should be protected from any legal hurdles in executing its task of finding a “fair value and resolution” for the debt-laden company.

Following this, the corporate affairs ministry Monday moved the Mumbai NCLT seeking protection for these directors of group entities as well from any future adverse proceedings as a precautionary measure.

Meanwhile, IL&FS has also filed an application seeking dispensation from appointing independent director on the group companies.

A two-member NCLT bench of VP Singh and Ravikumar Duraisamy scheduled both the matters for detailed hearing on April 12.

The government has appointed an eight-member board headed by banker Uday Kotak to steer the IL&FS group out of the crisis after it began to default payments due to severe cash crunch since late August.

The government superseded the previous board on October 1, 2018.

The government expects a resolution to the crisis over the next four-five months.

The government plea was initially rejected by the Mumbai bench but subsequently, which the government challenged in the appellate tribunal (NCLAT) which had on October 15 passed an interim order admitting the government plea.

The IL&FS group has 348 subsidiaries and together they owe over  94,000 crore to a clutch of commercial banks mostly state-run lenders and other financial institutions.

The appellate tribunal also stayed any action by any party/person/bank/company etc to foreclose, recover or enforce any security interest created over the assets of IL&FS and its 348 group companies, including any action under the Sarfaesi Act. 

The Live Mint reported

BS: HMT arm gets shareholders’ nod for voluntary liquidation

25 March 2019: HMT Chinar Watches which was cleared for closure by the government, Monday received shareholders’ approval for voluntary liquidation of the company, HMT Ltd said in a regulatory filing to the exchanges.

At an extra ordinary general meeting, the shareholders of HMT Ltd’s arm also cleared the appointment of insolvency professional Akhilesh Kumar Gupta as liquidator, which was also approved by the creditors in the meeting, it said.

The Cabinet Committee on Economic Affairs had in January 2016 approved the closure of three subsidary companies of HMT Ltd — HMT Watches, HMT Chinar Watches and HMT Bearings.

At the time, the Chinar unit, with 31 employees, had a defunct factory at Srinagar in Kashmir and an assembly unit at Jammu, while the bearing arm had 56 employees.

“The voluntary liquidation proceedings in respect of HMT Chinar Watches Limited shall be deemed to have commenced from the date of shareholders’ approval i.e. March 25, 2019,” the filing said.

The Business Standard reported

DNA: Banks plan to invite bids for Jet Airways, Tatas may be back in the fray

25 March 2019: Lenders are laying the ground for a new owner in Jet Airways as they insist on an undertaking from the shareholders that will trim founder-chairman Naresh Goyal’s stake to below 10% while Abu Dhabi-based Etihad will have to agree to exit from the ailing airline.

Led by State Bank of India (SBI), lenders are planning to call for open bids to sell Jet Airways after obtaining written agreements from Goyal and Etihad. Goyal, who currently owns 51% of Jet Airways, will have to bring down his stake to 9% and have no voting rights. Etihad, whose holding is at 24%, will have to agree to sell its entire stake if it does not bring in new capital.

The Tata Group may be back in the fray for acquiring Jet Airways after such conditions are met. Preliminary talks for a deal were held late last year but the Group had subsequently withdrawn as there was no firm indication that Goyal would step down.

“We have a two-stage plan and are insisting on an agreement from both the shareholders. Goyal has to cut his stake to 9% while Etihad, which has declined from making additional investments, will have to agree to exit. This will ease the path for us to rope in a new investor,” a senior bank official said.

Lenders will be subscribing to a 15-year-old zero coupon non-convertible debenture (NCD), issued by Jet Airways, to provide funding of Rs 800-1,000 crore in the interim period to keep the floundering airline afloat. Banks expect to rope in a new investor within four weeks, the source added.

The participation in the NCD will be subject to Goyal agreeing to sell 16% stake to a new investor so that his holding further falls to 9%. Etihad will also have to give an undertaking that it will exit Jet Airways by selling its remaining 12% stake.

“This will give us an option to explore more investors. Some may want Goyal out. Others may want Etihad out,” said another banking official.

In the first stage, Goyal will own 25.5% of Jet Airways, down from 51%, after conversion of debt into equity at Rs 1 a unit. Etihad’s stake will fall from 24% to 12% while banks will hold 50% of Jet Airways. Banks have kept a deadline of June 30 to offload the lenders’ stake.

SBI’s earlier resolution plan of coming out with a rights issue in the second stage to bring down the stake ownership has been shelved as neither Goyal nor Etihad is bringing in new capital. “Since fresh capital is not going to come in from the shareholders, we have proposed the NCD route,” the source said.

Until the new investor comes in, the lenders have suggested appointing Alvarez & Marsal, a global professional services firm, as a consultant for restructuring the airline and also ‘managing’ it along with the Jet Airways’s management.

McKinsey, a global management consulting firm, has already been roped in to chalk out a turnaround plan for Jet Airways.

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While there has been some buzz in the market that SpiceJet would buy a stake in Jet Airways, analysts said it does not have the balance-sheet strength to stitch a deal. Jet has a debt of Rs 8,400 crore and would require additional investments to do a turnaround.

The Tata Group, which is in the aviation space through two partnerships, looks like a contender. It holds a 51% stake in Vistara while Singapore Airlines is a joint venture partner. The group also has a 51% stake in AirAsia India.

“Among the domestic players, it is only Tatas who have the ability to take over a big airline like Jet Airways,” said a source close to the development.

The lenders will also be able to tap in Qatar Airways in case Etihad is out. “We would definitely look at Jet Airways if a 24% stake was not held by Etihad. How can I take a stake in an airline which is owned by our adversary,” Qatar Airways group CEO Akbar Al Baker had stated in January.

“Jet Airways is a very strong brand. There could be existing airline operators who would want to buy. Private equity investors or stressed asset funds could also be keen,” the bank official said.

The downside is that if Jet fails to get in a new investor, it will go into the National Company Law Tribunal (NCLT). “If the airline is grounded, it loses a lot of value. So we are willing to provide interim funding to prevent it from being grounded, subject to both the shareholders agreeing to our conditions. This will give us time to get in a new investor. We are prepared to go up to Rs 1,000 crore. But if things don’t work it, we will have to drag it down to the NCLT,” the official said.

The DNA reported

Jet Airways: Lenders take control, INR 1,500cr funding support

25 March 2019: Jet Airways stock exchange announcement

This is to inform you that the board of directors of Jet Airways (India) Limited (the “Company”) (the “Board”), at its meeting held today i.e. 25 March 2019, inter alia, considered the following:

The resolution plan being formulated by a consortium of domestic lenders led by State Bank of India (the “Lenders”) in accordance with the guidelines set out under the Reserve Bank of India (RBI) Circular RBl/2017-18/131 DBR.No.BP.BC.101/21.04.048/2017-18 dated 12th February 2018 on “Revised Framework for Resolution of Stressed Assets” (the “Resolution Plan”).

The said Resolution Plan, inter alia, envisages the following:

  • Conversion of INR 1/- of Lenders’ debt into 11.4 crore equity shares ;
  • 2 (two) nominees of promoter viz. Mr. Naresh Goyal and Mrs. Anita Goyal, and 1 (one) nominee of Etihad Airways PJSC to step down from the Board. Additionally, Mr. Nare~h Goyal to also cease to be the Chairman of the Company;
  • Constitution of an Interim Management Committee at the instructions of the Lenders to manage and monitor the daily operations and cashflow of the Company;
  • Immediate Funding support of upto ~INR 1500 crore by Lenders by way of issue of appropriate debt instrument against security of its assets which will restore normalcy to Company’s level of operations;
  • Bidding process to be initiated by Lenders for sale/issue of shares to new investor(s), the process expected to be completed in June quarter.

Pursuant to the above and in accordance with the Resolution Plan, the Board approved, subject to and upon receipt of the relevant approvals and compliance of the applicable laws:

  • Issue of 11.4 crore equity shares of the Company to the Lenders upon conversion of INR1 of the outstanding debt;
  • Resignation by Mr. Naresh Goyal, Mrs. Anita Goyal and Mr. Kevin Knight, as directors of the Company, and induction of 2 (two) nominee directors of Lenders. Additionally, Mr. Naresh Goyal will also cease to be the Chairman ofthe Company;
  • Creation of appropriate security over the Company’s assets for securing the existing facilities extended by the Lenders and the proposed immediate funding support of upto ~INR 1,500 Crores by way of issue of appropriate debt instrument; and
  • Constitution of an Interim Management Committee to manage and monitor the daily operations and cashflow of the Company;

NIE: Public Sector Banks’ NPA sales to asset reconstruction companies under government lens

25 March 2019: As part of its concerted efforts to make the process of bad loan recoveries better and more transparent, the Central government has directed the Public Sector Banks to submit details of stressed assets sold by them to asset reconstruction companies (ARC) between 2012 and 2018 fiscals. 

“The (finance) ministry has asked all the PSBs to submit all details of their sales of stressed assets between FY2012 and FY2018 (that are valued at) Rs 50 crore and above,” a senior official from the Department of Financial Services (DFS) told this publication.

The official said the order has been issued after consultations with the Ministry of Corporate Affairs and the Reserve Bank of India.

“There are reports of gross irregularities in valuations in some cases. Several instances were cited where banks weren’t collecting interest on sale of assets. In many cases, assets were being sold at very low prices.

So, a final look at the books would help in making the process of recovery more transparent in future and to detect (if there are) any potential irregularities (currently),” the official added.

According to the DFS official, in many cases, the stressed assets were sold to ARCs at much lower valuations, despite an option available now to take such cases to resolution proceedings under the Insolvency and Bankruptcy Code (IBC). 

The ARC business is designed to buy out debts marked as non-performing assets (NPAs) from banks at a discount. This helps lenders clean up their balance sheets, while specialists can salvage some value out of the debt-laden assets by either selling or turning them around.

However, while the ARCs accept that recoveries have been sharper post-IBC, challenges have increased for them, given the stricter guidelines set by various regulators. Also, recoveries made by the ARCs are also not keeping pace with the growth in the sale of NPAs to them.

For instance, the RBI has raised the net owned funds (the amount an ARC can start a business with) for new ventures to Rs 100 crore (from Rs 2 crore). All ARCs would have to meet this requirement from April 1, 2019.

“If you look at the market, top five out of 24 ARCs control almost 90 per cent of the business. If you see the latest guidelines, this means that regulators want only a few large players with the ability to raise funds,” said a senior executive from JM Financial Ltd.

Therefore, going forward, it’s going to get tougher for the asset reconstruction companies, they claim.
According to the latest RBI projection, the gross NPA asset ratio in the banking system is expected to touch 10.3 per cent by the end of 2018-19.

“The recovery has been very good this financial year. PSBs have performed well to meet the recovery target of 1.8 lakh crore.

In the coming fiscal, the target is likely to be higher,” the DFS official said.
The government has one more initiative, Project Sashakt, on the works.

Under this, an asset management company has to set up an alternative investment fund to buy bad loans and help in the resolution of bad loans. 

The New Indian Express reported

ET: Bitter NPA pill for Renuka Sugars’ lenders

25 March 2019: A stern interpretation by the Reserve Bank of India (RBI) of its contentious February 12 circular has stunned banks. The regulator has told banks to categorise a particular loan account as non-performing asset (NPA) almost a year after the borrower’s debt was rejigged and the firm had received fresh capital infusion.

The company in question is Shree Renuka Sugars which became a subsidiary of the Singapore-based Wilmar Sugar Holdings (WSH) in 2018 following what was billed as one of the largest foreign direct investment in the agriculture sector. But RBI in a letter to lending banks last week said that their loans should carry the NPA tag because a higher stake held by Wilmar now does not amount to a ‘change in management and ownership’.

Wilmar currently holds more than 58% in Renuka, India’s leading sugar company. Since Wilmar was a minority shareholder earlier, RBI is refusing to recognise a ‘change of ownership’ in Renuka even though the former CEO Narendra Murkumbi had resigned.

This is a technical, literal interpretation of the law,” a senior banker told ET. “Such a regulatory stance could stand in the way of debt resolution in other companies. For instance, hypothetically, if Etihad had raised its holding in Jet, (founder) Naresh Goyal moves out, and the company’s debt is restructured under a new scheme, will RBI still insist that is no change of management and the exposure is not a ‘standard loan account’ just because Etihad holds 24% now,” said another banker. Renuka has not defaulted after the loans were restructured.

According to RBI’s February 12 circular, credit facilities of borrowing entities may be upgraded as ‘standard’ (from NPA) after a change in ownership is implemented, either under the Insolvency & Bankruptcy Code (IBC) or under the debt restructuring framework outlined in the circular.

Wilmar held 38.57% stake in Shree Renuka Sugars as on March 2018. Following capital infusion and open offer, amounting to an investment of Rs 1,200 crore, Wilmar acquired majority control. Wilmar also gave a guarantee of Rs 2,700 crore as part of the debt resolution which was agreed in March 2018. Renuka Sugars’ standalone debt at the end of September 2019 was Rs 2,117 crore.

In a case where a debt-ridden company is classified as a ‘standard account’ following a change in management, banks have to ensure that among other things, the acquirer is not a person disqualified in terms of Section 29A of the Insolvency and Bankruptcy Code, 2016. This section bars defaulting promoters and ‘related persons’ from bidding for assets.

renuka-sugars-info
Wilmar, it may be mentioned, has a joint venture with the Adani group. “With the financial closing a week away, the timing of RBI’s letter has also upset banks. Banks which had written back the provision after the account was upgraded, will now have to provide for in the March 31 numbers,” said a source.

Renuka Sugars’ standalone revenue for the December quarter was Rs 1,093 crore, down 39% from the year-ago period. Boosted by forex gains, it posted a net profit of Rs 69 crore against a loss of Rs 2,294 crore last year. For the first nine months of FY19, its net loss was Rs 2,559 crore and revenue stood at Rs 4,731 crore. The debt restructuring helped reduce interest outflow in the first nine months by nearly 30%.

The company’s consolidated numbers (which are available annually and include its overseas operations) showed net sales of Rs 7,857 crore in FY18 (down 34%) and net loss of Rs 2,204 crore. On Friday, the stock closed at Rs 10.8, down 1.1% from the previous day’s close.

The Economic Times reported

DNA: Hind Glass says will repay Rs 2,500 crore loan by April

25 March 2019: In a relief to banks like State Bank of India (SBI), debt-ridden glass packaging major, Hindustan National Glass and Industries Ltd (HNGI), promised its bankers repayment of the complete outstanding amount of Rs 2,500 crore by April 2019.

A large part of the fund would be coming from nearly Rs 1,200 crore that is being pumped into the company by a group of Singapore-based investors in the Indian arm of global liquor major Carlsberg.

The country’s largest glass bottle maker has given its assurance in a statement filed with the Calcutta High Court to liquidate its dues by next month.

This would mean asking the SBI to extend its deadline which ends on March 31 by another month.

As per a memorandum of understanding (MoU) signed by HNGI in August last year with its secured lenders, it would be paying off Rs 2,007 crore to all its lenders in the form of cash and equity within 90 days from the date of approval of the compromise settlement by SBI on behalf of the consortium lenders.

Following this, HNGI has paid about Rs 500 crore to its bankers.

“Time to make repayment of the loans have been extended. In so far as State Bank is concerned, the time for repayment stands extended till March 31. It is submitted that the petitioner has been able to arrange a foreign investor who has agreed to invest a sum of approximately Rs.1400 crores,” the court has said.

There is a dispute over how much HNGI actually owes its bankers currently.

While the bankers argue that the total dues add up to Rs 2,800, HNGI says it is much lower.

As per the latest disclosures, the total indebtedness of the company controlled by the Somany family is Rs 2,524 crores.

Following the assurance, the court has asked the bankers to go soft on the promoters and allow them time to repay.

In January, investors Yeo Soon Keong, Pawan KumarJagetia, Nirmal Madan Singh and Kanuriya Parliwal through their Singapore-based special purpose vehicle (SPV) Lotus One decided to pick up a 34.41% stake in HNGI. Additionally, Lotus One might extend loans of up to Rs 800 crore into HNGI, in tranches either directly or through associates to help HNGI repay most of the debt.

SETTLING DUES

  • Rs 2,800 cr – Total dues of the company according to bankers  
  • Rs 2,524 cr – Total dues according to the latest disclosures by the company  
  • Rs 500 cr – HNGI has already paid its bankers

DNA reported

FPJ: PNB sets Q4 recovery target for Rs 10,000 crore

25 March 2019: After returning to black in the last quarter, lending major Punjab National Bank (PNB) has set a recovery target of Rs 10,000 crore for the concluding Q4, said the company’s Managing Director and Chief Executive Officer Sunil Mehta. “The bank has set a recovery target of Rs 10,000 crore during the current quarter. The target for the next fiscal is yet to be fixed,” Mehta told IANS in an interview.

The state-owned lender has recovered about Rs 16,000 crore in the last three quarters of the current fiscal. Apart from a separate stressed asset vertical, the bank has exercised a large number of steps to resolve the non-performing asset (NPA) issue. Currently, the bank runs a special “one time settlement” (OTS) scheme for NPA-2018 which deals with accounts of up to Rs 25 crore.

“OTS camps are held throughout the country where borrowers and the bank try to arrive at a suitable negotiated amount,” he said. Besides, the company has also intensified the campaign for recovery in specifically identified accounts having 100 per cent provision provided for which is operative up to March 31, 2018.

The move is significant as any recovery made under this campaign will directly impact the bank’s profitability by way of release of provision. According to Mehta, more focus has been laid on recoveries through putting securities into e-auction under SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002) on an all-India basis.

“Apart from placing the details of the upcoming e-auctions on our own portal, the bank is also uploading the auctions on the common portal designed by the Indian Banks’ Association (IBA) for displaying properties being auctioned by the banks, starting with public sector banks,” he said.

Last month, the lending major decided to place more than 4,000 properties all over India on e-auction as part of its loan recovery effort. The PNB is also expected to recover a substantial amount from its NPA recovery mechanism – “Mission Gandhigiri”, which will be completing two years of its operations.

Launched in May 2017, the mission has consistently delivered positive results. It was born out of the need to name and shame the defaulters and urge them to pay back by increasing societal pressure. “Mission Gandhigiri” has a dedicated recovery team across all circles of the bank.

Accordingly, the passive recovery mechanism entails the team members visiting the borrowers’ office or residence and sitting there silently with placards that have hard-hitting messages such as “It is public money, please repay the loans”. However, for high value stressed assets, the NCLT has emerged as the primary platform for resolution, Mehta said.

The Free Press Journal reported