TH: Etihad in talks with partner to bid for Jet

28 March 2018: Etihad Airways is in talks with a partner to jointly bid for Jet Airways which has been put up for sale by banks which have taken control of the financially-troubled airline.

Government sources said Etihad has not given up on Jet in which it held 24% stake. After banks acquired 50.1% stake in Jet, shareholding of all existing investors fell by half with Etihad left holding 12% stake.

“Etihad will not bid alone. They are in talks with an investor for jointly bidding for Jet Airways,” said the sources. Aviation rules allow a foreign investor to pick up a maximum of 49% stake in an airline.

Protecting investment 

People familiar with the development said that Etihad Airways, though now financially-constrained on account of its years of losses, is keen on increasing its holding in Jet to protect its investment as well as to ensure traffic flow into its network from India.

So far, Etihad had invested or arranged more than $1 billion in/for Jet Airways and since 2014, Jet had been sending passengers from across India to the Abu Dhabi hub of Etihad. 

With its two main demands namely the removal of promoter Naresh Goyal and his spouse Anita Goyal from the board and bringing down their stake to below 10% having been met through the new bank-led provisional resolution plan, Etihad Airways is believed to be considering increasing its stake to a maximum of 49% and rope in a partner to operate the airline. 

As per foreign direct investment rules, the effective control of Indian carriers has to remain with Indians.

So, even if Etihad increases its holding to 49% it cannot control Jet Airways and would need a reliable Indian partner to do so, according to analysts. 

The partner is believed to be National Investment and Infrastructure Fund (NIIF) in which Abu Dhabi Investment Authority has a stake.

NIIF is majority owned by Indian government and some Indian financial institutions.

Very attractive franchise

“Jet is a very attractive franchise. It has the routes, the network and the brand. And all these make it an attractive package. Yes, there were issues among the key investors [Goyals and Etihad] which is now a thing of the past with the founders stepping down,” a person familiar with the development said.

“Since Jet will now be auctioned by the lenders, Etihad will find it convenient to gain control through some partners,” the person said.

A final decision is expected to be taken on March 31 when Etihad Airways board would meet in Abu Dhabi.

When contacted, an Etihad Airways spokesperson said, “Etihad Airways does not comment on rumours or speculation.”

With banks taking control of Jet Airways, lenders would now nominate two members on the board for the interim period (till such time the new investor comes in). 

One of them would be former State Bank of India Chairman A.K. Purwar who would be the non-executive chairman of the board. 

“The board of Jet had nine members, of which three resigned. Now, there will be additional two members,” said a banker having knowledge of the development.

The Hindu reported

BS: Anil Ambani’s stake dips to 22% in RCom; Banks sell 15.6% pledged shares

28 March 2019: Anil Ambani group’s stake in Reliance Communications fell to 21.97 per cent after its lenders — IndusInd Bank and RattanIndia Finance — invoked the shares pledged with them and sold it in the markets.  

The lenders invoked and sold 15.6 per cent of RCom stakes pledged to them, said a source close to the development. The source said that the rest of Anil Ambani group’s stake was not pledged with the banks.

While IndusInd Bank invoked 4.52 per cent from the total 9.37 per cent stake pledged with it, RattanIndia Finance invoked pledged shares with total stake of 11.08 per cent in the bankrupt telecom firm. As of December 2018, Anil Ambani group entities owned 53.08 per cent stake in the company. Of this, 30 per cent of the company’s stake was pledged with the lenders and since January, this block of 30 pc stake has been off-loaded in the market by lenders, according to BSE data. L&T Finance and STCI Finance also sold RCom’s shares recently, the BSE data shows.

On Thursday, RCom shares closed at Rs 4.35 per cent on the BSE, down 5 per cent over Wednesday’s close. The company had a market value of Rs 1,203 crore as of Thursday, according to BSE statistics.

On March 18, RCom terminated an agreement with Mukesh Ambani-owned Reliance Jio to sell its telecom infrastructure for Rs 18,000 crore. This was after the company did not get approvals from the government and lenders in time for the transaction. In its discussions with the department of telecom, Jio had declined to pay RCom’s past dues, which led to the DoT to refuse permission for the deal.

RCom had a debt of Rs 45,000 crore. In June 2017, public sector banks had approved a standstill agreement with the company, under which the lenders did not seek their dues till December 2018.  

In February, RCom had said it would move the National Company Law Tribunal under the Insolvency and Bankruptcy Code, citing its failure to get permission from government and lenders. The company had promised to sell its real estate worth Rs 10,000 crore to pay its lenders. But till date no transaction has been announced by the company.
The Indian lenders, led by State Bank of India (SBI), IDBI and China Development Bank, meanwhile, are awaiting the fate of the IBC proceedings to get their money back.
On March 12, the National Company Law Appellate Tribunal (NCLAT) had pulled up SBI, saying the bank gave false hopes that it would recover Rs 37,000 crore by selling RCom’s assets. The NCLAT rap came after the banks did not agree to release Rs 260 crore lying in an escrow account to pay RCom’s equipment supplier, Ericsson. The money was later paid after Mukesh Ambani, Anil Ambani’s elder brother, bailed him out.

Interestingly, Anil Ambani’s promoter entities in February had sued Edelweiss Financial Services in the Bombay High Court after the financier sold the pledged shares of Reliance group companies in the market to recover dues.  On February 8, the ADA group said L&T Finance and certain entities of Edelweiss group, invoked pledge of listed shares of Reliance group and made open-market sales of the value of approximately Rs 400 crore in early February.

The group had said the “illegal, motivated and wholly-unjustified action” by the two groups has precipitated a fall of Rs 13,000 crore, an unprecedented 55 per cent, in market capitalisation of the Reliance group over four days, causing substantial losses to its shareholders.

The Business Standard reported

BQ: RCom Vs Ericsson: Round Two Begins At The Supreme Court

28 March 2019: The second act in the Reliance Communications Ltd.versus Ericsson saga started in the Supreme Court today.

The Anil Ambani-group company sought to withdraw its objection to the insolvency application filed by Ericsson. The Swedish telecom equipment maker, which recovered dues worth over Rs 500 crore from RCom, opposed the withdrawal of objections and now wants the insolvency proceedings to end.

The matter came up before a bench of Justice Rohinton Nariman and Justice Vineet Saran. It directed Ericsson to respond as to why it doesn’t want the insolvency proceedings, initiated as a result of its application, to continue.

In 2017, Ericsson had approached the NCLT with a petition to initiate insolvency proceedings against RCom for failing to clear dues worth Rs 1,500 crore. It was admitted by the Mumbai bench of the National Company Law Tribunal on May 15 last year. This is at the centre of the arguments before the apex court now.

The end of the insolvency process is critical for Ericsson, failing which it may be forced to return Rs 550 crore that it has secured. That’s because after the NCLT admitted Ericsson’s insolvency application, RCom had approached the NCLAT against it.

In May last year, the NCLAT granted a conditional stay on the insolvency process. This was granted since RCom agreed to pay Rs 550 crore to Ericsson as a settlement amount. In the same order, the NCLAT noted:

The payment of Rs 550 crore in favour of the ‘Operational Creditor’ [Ericsson] shall be subject to the decision of these appeals. If the appeals are dismissed, the ‘Operational Creditor’ will pay back the amount to the ‘Corporate Debtors’ [RCom].

This means if appeals to the NCLT order—which had paved the way for the insolvency process—are dismissed, the proceedings under the bankruptcy law will start and Ericsson would need to pay back Rs 550 crore to RCom.

This could be why Ericsson is now arguing to withdraw its insolvency application. The apex court has given the company two weeks to file its reply.

The Bloomberg Quint reported

BS: Lenders ask for fresh round of bidding for Amtek Auto at NCLAT

28 March 2019: Lenders of Amtek Auto Thursday sought permission from the NCLAT to conduct a second round of bidding for the debt-ridden auto component maker after the highest bidder UK-based Liberty House backed out.

The Committee of Creditors (CoC) led by Corporation Bank informed the National Company Law Appellate Tribunal (NCLAT) that the second highest bidder Deccan Value Investors LP is also considering to submit a revised offer.

However, an NCLAT bench headed by Chairman Justice S J Mukhopadhaya said it would like to hear Deccan Value Investors and Amtek Auto’s former promoters on the matter.

NCLAT listed the matter for next hearing on April 22 and said “CoC would not approve any other plan” in between.

It also said the Resolution Professional (RP) will continue to function and would “ensure that the company remains a going concern.” 

According to reports, Deccan Value Investors, which had emerged as the second highest resolution applicant for Amtek Auto, had placed a bid of Rs 3,150 crore.

Amtek Auto has a total debt of Rs 12,603 crore and the liquidation value of its assets was determined at Rs 4,119 crore.

Liberty House had offered Rs 4,025 crore, including upfront payment of Rs 3,225 crore and a fresh infusion of Rs 500 crore for stabilising and improving operations.

However, Liberty House backed out of the process.

Earlier this month, NCLAT had allowed the withdrawal of Liberty House’s bid for ARGL, an Amtek subsidiary.

Amtek is an integrated auto component manufacturer with operations across forging, iron and aluminium casting, machining and sub-assemblies.

In July 2017, NCLT had admitted insolvency proceedings initiated by a consortium of banks led by Corporation Bank.

The Business Standard reported

ET: NCLT sees violation of Sec 29(A) in Sterling Biotech case

28 March 2019: The National Company Law Tribunal (NCLT) in the Sterling Biotech case for the second time has questioned the motive of lenders, led by Andhra Bank to withdraw their bankruptcy application and to choose a one-time settlement with the absconding promoters of Sterling Biotech. 

The tribunal has also questioned the source of funds which the lenders of the defaulting company have agreed to accept as the one-time settlement (OTS) on behalf of the promoter. The four promoters of the group — Nitin Jayantilal Sandesara, Chetankumar Sandesara, Dipti Chetan Sandesara and Hiteshkumar Patel — are currently absconding and facing extradition orders. 

Sec 29(A) of the Insolvency and Bankruptcy Code (IBC) bars re-entry of the promoter in to the resolution scene on any form. 

This is the second time the appellate tribunal has questioned the motive of banks that have accepted an OTS offered by promoters, Nitin Jayantilal Sandesara and family. They have offered Rs 3,100 crore of repayments by June 2019. At the earlier hearing of March 11, the tribunal had questioned the one-time settlement by absconding promoters, for a loan of Rs 7,500 crore excluding interest and penalties from a group of lenders led by Andhra Bank, while Sandesara group owes over Rs 15,000 crore to lenders. 

On March 7, ninety per cent of the Committee of Creditors (CoC) decided to withdraw insolvency proceedings against Sterling Biotech under Section 12 (A) of the IBC. 

“Hence, this is a peculiar case… Section 12(A) is not a substitute of 29(A)… Suppose 12 (A) is allowed, what Sandesara was not getting under 29(A) but will now get full freedom through 12(A),” the NCLT noted. 

The Gujarat-based pharmaceutical company has a total debt of Rs 9,035 crore while the entire Sterling Group owes over Rs 15,000 crore. 

NCLT questioned the settlement offer as the OTS is for around Rs 3,100 crore, which translates to 65 per cent haircut for lenders. 

However, lenders have informed that the money for the OTS came from Sandesara’s Nigeria-based firm Welfro Ltd. 

Promoters of Vadodara-based Sterling Group have said that close to $700 million will come from Dubai-based Al Khoory Group. 

Earlier this month, the NCLT noted that the OTS was signed by one Farhad Daruwalla on behalf of Sandesara group and that the offer did not specify whether Sterling had authorised Daruwalla to submit the proposal. 

The NCLT was suspicious on the lenders’ acceptance of the OTS from the absconding promoters against whom investigative agencies are proposing to enact the Fugitive Economic Offenders Act. 

Consequently, the Enforcement Directorate (ED) informed the NCLT that the case is being heard in a special court in Delhi. 

“Out of total fraud of over Rs 14,000 crore, the ED has already attached the properties of promoters which are worth around Rs 4,200 crore,” the ED’s counsel told NCLT. 

“The newly enacted Fugitive Economic Offenders Act supersedes all the other laws and under this Act, properties of the accused in India and abroad can be attached. 

Hence, all the lenders should make their claim and representation to the special court in Delhi, the counsel further said. 

The tribunal has allowed the Ministry of Corporate Affairs, Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) to file their responses within three weeks. 

The case will be next heard on April 26.

The Economic Times reported

BI: Even British Airways and Philips stand to lose money in India’s biggest financial scandal of 2018

28 March 2019: Ahead of the debt resolution process of troubled infra lender Infrastructure Leasing & Financial Services (IL&FS), a number of well-known companies across the world are trying to get their voices heard in the insolvency proceedings. 

These include British Airways and the Indian subsidiary of Philips, according to media reports. Both companies, along with nearly a hundred others, have reportedly filed petitions in the National Companies Law Appellate Tribunal (NCLAT) wishing to be recognised as financial creditors of IL&FS. 

Their contention is that their provident funds had invested in bonds and debt instruments issued by the cash-strapped infrastructure lender, and therefore, they stand to benefit from participation in the resolution process as a stakeholder. 

IL&FS had around ₹940 billion in outstanding loans at the end of 2017-18, ₹573 billion is in the form of loans to Indian banks – most of which are state-run. Around ₹150-200 billion has come from the provident funds of companies like BA and Philips India. 

The infrastructure lender, which invests in government projects like highways, ports, bridges and dams, reached its current state of high debt and illiquidity owing to a lack of regulatory oversight and inadequate due diligence before spending on projects. 

As the prospects for the infrastructure and power sector declined following the financial crisis of 2008-0, the company’s projects were either stalled or faced huge cost overruns. Hence, the returns for IL&FS’s subsidiaries dried up and its debts continued increasing. 

To make matters worse, the company’s directors allegedly laundered funds and sanctioned investments in projects without guarantees. 

In a bid to pay off its debts and avoid bankruptcy, the company has been selling of a range of assets, including its renewable energy business and financial services unit. The sales are part of a resolution plan that a government-appointed committee, led by Uday Kotak, submitted to the NCLT, a special insolvency court, on 31 October. 

The Business Insider reported

FE: Essar Steel: Decision on distribution of funds by Friday

28 March 2019: The lenders of Essar Steel on Wednesday told the National Company Law Appellate Tribunal (NCLAT) that a decision by the committee of creditors on whether Standard Chartered, an unsecured financial creditor of the bankrupt firm, should get higher payout for its dues from the Rs 42,000 crore coming from the resolution plan of ArcelorMittal, would come by Friday.

The appellate tribunal subsequently adjourned the matter to April 9 for the next hearing. “We have to see the outcome of the CoC meeting,” said a two-member NCLAT bench headed by chairman Justice SJ Mukhopadhaya.

The NCLAT had on March 20 asked the resolution professional of Essar Steel to call for a fresh meeting of its CoC to reconsider distribution of Rs 42,000 crore fund. It had also said that the March 8 order of the Ahmedabad-based bench of the National Company Law Tribunal (NCLT) approving ArcelorMittal’s plan should be implemented in letter and spirit.

During the proceedings of the appellate tribunal, the counsel informed the bench that meeting was underway in accordance with the NCLAT orders. They submitted that the CoC is considering distribution of funds between the financial creditors and operational creditors as per the suggestions from the Ahmedabad bench of the NCLT, which had suggested a 85:15 distribution between the financial and operational creditors against the 90:10 distribution between them as proposed in the resolution plan.

Moreover, as per the previous direction of NCLAT, the Insolvency & Bankruptcy Board of India (lBBI) on Wednesday informed the ratio of distribution between financial creditors and the operational creditors in the resolution plan.

According to IBBI’s counsel, in 88 cases that have seen successful resolution, financial creditors, on an average, have received 48.24% of their claims. While the operational creditors have received 48.41% of their claims, in the same number of cases.

On March 20, in the last hearing, the NCLAT also had directed IBBI to share data over distribution of funds among the financial and operational creditors in the resolution plans. The NCLAT was hearing a plea by Standard Chartered Bank, an operational creditor of the company, challenging the distribution of fund.

Standard Chartered is against the plan as it was being given only 1.7% of its total dues from Essar Steel, while other financial creditors, forming part of the CoC, were getting over 85% of their dues. ArcelorMittal’s resolution proposal provides financial creditors Rs 41,987 crore out of their total dues of Rs 49,395 crore.

Operational creditors, under the plan, would get just Rs 214 crore against the outstanding of Rs 4,976 crore.
If the ArcelorMittal plan is implemented, Standard Chartered will only get Rs 60 crore against its claims of Rs 3,187 crore from Essar Steel.

The Financial Express reported

FE: NCLT approves amended resolution plan for Jyoti Structures

28 March 2019: In keeping with the appellate tribunal’s latest directions, the National Company Law Tribunal (NCLT) approved an amended version of the sole resolution plan for Jyoti Structures.

The two-member Mumbai bench of the tribunal, led by Justice VP Singh and Ravikumar Duraisamy said, “The National Company Law Appellate Tribunal has already held the resolution under Section 30 (2)… and further directed to NCLT to approve the plan in section 31 of IBC with one modification that is to implement the resolution plan in 12 years. Therefore, we hereby approve the resolution plan.”

As per instructions of the NCLAT, the resolution plan presented by a consortium led by Sharad Sanghi, MD and CEO of Netmagic Solutions, also the sole bidder for the debt-laden company, was admitted by the NCLT on Tuesday with a slight amendment. In a change from the earlier plan that was denied by the NCLT back in July last year, Sanghi has offered to pay Rs 3,965 crore in 12 years against 15 years stated earlier.

Jyoti Structures, with a total outstanding debt exceeding Rs 7,000 crore, is one of 12 stressed companies identified by the RBI for insolvency proceedings in June last year.

On August 20, 2018, the NCLAT ordered the Mumbai bench of the NCLT not to pass any order for liquidation of Jyoti Structures. It also asked the resolution professional not to sell any movable or immovable property of the company. Though the NCLT Mumbai did not order liquidation, it had rejected Sanghi’s application through an order pronounced on July 25. The 270-day period for the resolution process for Jyoti Structures came to an end on March 31, 2018.

Meanwhile, DBS Bank, one of the secured financial creditors, in its capacity as the “first sole exclusive charge” and a 0.73% voting share in the consortium, placed on record its opposition and pled for a stay, which was rejected by the NCLT.

The Financial Express reported