BQ: NCLAT To Decide If More IL&FS Firms Can Repay Debt

29 March 2019: Lenders to some of the entities related to Infrastructure Leasing & Financial Services Ltd. approached the NCLAT today asking it to direct group companies that can meet some obligations to clear the dues of senior secured creditors.

The lenders want the appellate tribunal to modify its order of a moratorium on these companies. The bench of Justice SJ Mukhopadhyay and Justice Bansi Lal Bhat has asked the IL&FS group to submit details of the dues, operational creditors and financial creditors of these companies.

The government, which took over the infrastructure conglomerate, had earlier categorised the group entities into three categories based on their ability to service debt:

  • Red: the firms that can’t meet any debt obligations.
  • Amber: the ones that can meet some debt obligations.
  • Green: the firms that can meet all debt obligations.

The appellate tribunal on Feb. 11 had lifted the moratorium on the companies under the green category, allowing them to repay debt obligations.

On Feb. 25, the tribunal passed an order barring banks and financial institutions from declaring IL&FS and its subsidiaries as non-performing asset. The Reserve Bank of India in March approached the NCLAT seeking modification of that order.

The next hearing is scheduled for April 8.

The Bloomberg Quint reported

TT: Wanaparthy: After 16 years, oil mill to regain its past glory

29 March 2019: Sixteen years after the closure of an oil mill due to which it had fallen prey to the national oil import policy of the then government, it will soon see the light of that day, as the State government has decided to make a one-time settlement of its debt and acquire it to run the oil mill once again, to process groundnut oil from the local farmers’ produce.

Sri Vijaya Vardhini Cooperative Oil seeds Producers’ Association, that owns 94.36 acres of land on the outskirts of Beechupally near NH44, had built an oil mill in 13,000 square feet area in their land back in 1992. Initially, production was fine, but due to the changes in national oil import policy which had facilitated large-scale import of oil into India, the mill gradually ran into losses.

On May 13, 2002, the then government gave orders for closure of the mill. Minister for Agriculture S Niranjan Reddy, who was already in Telangana movement at the time, had waged a movement along with workers and locals to reopen the oil mill.

The oil mill had run into debts amounting to Rs 26.31 crore to National Dairy Development Corporation back then. After the formation of Telangana, this oil mill went into the purview of Telangana State Oil Federation. Immediately after being inducted into the Cabinet recently, Niranjan Reddy issued directions to re-acquire the oil mill by making one-time settlement of the debt.

Telangana State Oil Federation has sent proposals to pay Rs 15.05 crore as interest and Rs 11.26 crore towards principal amount as part of the settlement deal to National Dairy Development Corporation. The proposal has been accepted.

This means the oil mill would soon start functioning and the high yield and high-quality groundnut from Wanaparthy and Nagarkurnool districts would soon be processed in this oil mill, helping the mill to reclaim its lost glory in the days to come. The oil mill would have positive implications on the farming sector and would also help in creating employment locally. Most importantly, it will now become a State asset.

Telangana Today reported

ET: JSW Steel targets Rs 650 cr Ebitda for Monnet Ispat before deciding on merger

29 March 2019: JSW Steel is targeting operational earnings (Ebitda) of Rs 650 crore for Monnet Ispat and Energy, which it acquired recently, before it takes a call on the company’s merger with itself, a senior executive of JSW Steel said.

Monnet Ispat will also be required to bring its net debt to Ebitda ratio down to 3.5x before any of the two parties – JSW Steel or Monnet Ispat – can seek a merger. 

“In any one single financial year, if the two conditions are satisfied, then either party has a right for merger into JSW Steel,” Seshagiri Rao, joint managing director of JSW Steel, told analysts after the company announced its third-quarter earnings.

In the December quarter, Monnet Ispat earned an Ebitda of Rs 21.6 crore, with sales revenue of Rs 494 crore and net loss of Rs 78 crore.

The Economic Times reported

ET: Hunt for Jet Airways’ buyer takes SBI, Naresh Goyal to TPG Capital and Delta Air Lines

29 March 2019:  Jet Airways’ top lender State Bank of India and its founder Naresh Goyal have reached out to private equity giant TPG Capital and US carrier Delta Air Lines to explore the possibility of a stake purchase in the beleaguered airline.

Two people in the know said that while SBI has begun exploratory talks with TPG, Goyal has reached out to Jet’s commercial partner Delta.

A senior bank official confirmed that TPG has been sounded out but cautioned that talks are very preliminary in nature and the real picture will emerge only after the bank asks for expressions of interest (EoIs) early next month.

“TPG is in touch but they being a PE fund are unlikely to take a majority stake. They may at best take some minority stake. Only airlines may be interested in buying a large stake. There may be other airlines interested which we will know only after the EoIs come in. This is all at a very preliminary stage right now so nothing can be said,” this official said.

Both had been wooed previously by Goyal without success. TPG Capital last year had shown interest in Jet’s loyalty programme Jet Privilege which was also up for sale.

A team from Delta visited Jet’s Mumbai office thrice this week. A third person in the know said this was to explore synergies in maintenance and engineering with the airline. Jet has deep commercial ties with the Air France-KLM combine and through them with Delta.

TPG declined to comment. Delta said it does not comment on market speculation. SBI and Jet didn’t reply to emails till the time of going to press.

AIRLINE DEFAULTS ON ECB REPAYMENT

Meanwhile on Thursday, Jet informed the BSE that it has defaulted on repayments on external commercial borrowings, due on March 28, raised for working capital purposes. It attributed the default to “temporary liquidity constraints” and said it has engaged with the lender for the same. It didn’t elaborate.

State-run banks took over the board and management of Jet on Monday with 50.1% stake, Goyal’s holding was reduced from 50.1% to 25.5%, Etihad Airways’ share came down to 12% from 24% and public shareholders were left with 12.5%. Goyal resigned as chairman and board member.

Jet’s lenders are now looking for a new buyer. The bids will be thrown open on April 9 and the last date for submitting bids is April 30. The lenders hope to find a new buyer for Jet by June-end. Jet CFO Amit Agarwal said the bidding is nonrestrictive and both Goyal and Etihad can bid.

Jet, in the throes of acute financial distress, has defaulted on loan repayments, lease rentals and vendor payments. It has also delayed salaries, grounded planes and laid off staff.

But on Thursday, Jet told its travel agents that it is reinstating more than 60 domestic flights between March-end and April 25.

One of the people cited above said that while there may be little change in the number of grounded aircraft by then, the airline will redeploy its international capacity, primarily by cancelling some flights to Gulf, on domestic routes.

The flights that will be resumed include those between Mumbai and Hyderabad, Ahmedabad, Jaipur, Indore, Aurangabad, Pune, Goa and from Delhi to Jaipur, Lucknow, Indore, Bhopal, Bhuj, among others.

“Guests who have been re-protected by you on alternate flights due to cancellation of the above flights can be rebooked on the original flights in the lowest available RBD (reservation booking denominator) in the same cabin without any ADC (additional collection),” Jet said in a letter to agents, indicating that no additional charge should be levied on booking the passengers back.

One of the sources added that Jet is currently flying just 35 planes, down from its original fleet of 124 planes in December. Jet’s Agarwal told ET that lessors have agreed to give the airline more time and that Jet will have 75% of its fleet flying in a month.

The Economic Times reported

TOI: Setback for Anrak as HC allows SBI to go ahead with insolvency process

29 March 2019:  In a major setback to Anrak Aluminium company, the Telangana high court on Thursday allowed an appeal filed by RBI and allowed SBI authorities to drag the company to the insolvency process at National Company Law Tribunal, Hyderabad.

A bench of Justice Raghavendra Singh Chauhan and Justice T Amarnath Goud pronounced this order after hearing a writ appeal filed by RBI challening the order of a single judge who found fault with an RBI circular and also with SBI for initiating insolvency process even after agreeing to settle for the company’s one-time settlement offer of Rs 1,275 crore.

The company took loans from a consortium of banks headed by SBI and the total dues stand at a staggering Rs 3,000 crore. 

Anrak company, a joint venture firm floated by Penna industrial group and Ras Al Khaima of the United Arab Emirates, was supposed to set up an aluminium plant in Vizag Agency area with the help of raw bauxite supplied from AP Mineral Development Corporation.

Following resistance from tribals, then AP government cancelled the agreement to supply bauxite to Anrak. The single judge found fault with SBI mainly on this ground that when the state government had failed to fulfil its commitment, it may not be fair to blame the company.

RBI counsel S Niranjan Reddy, however, said that mere reference to NCLT would not harm the company and the tribunal-appointed resolution professional could suggest a resolution plan that may include restructuring of the company. 

Appearing for Anrak, senior counsel Raghunandan Rao told the bench that nothing would remain in their hands if the NCLT admits the plea and commences the insolvency resolution process and the bank may not get even the amount that was assured by them. “We agreed for a settlement of Rs 1,275 crore and have already paid Rs 400 crore. We would pay the remaining amount by the end of March,” he said. The bench did not agree with the company’s arguments. The bench, however, suspended its judgement for a period of one month to enable the company to avail itself of legal remedies.

The Times of India

ET: Essar Steel CoC may vote against higher payments to StanChart

29 March 2019: The committee of creditors (CoC) in the Essar Steel insolvency case is likely to vote against higher payments to Standard Chartered, but may partly increase the amount operational creditors get as part of the settlement offered by ArcelorMittal, said people with knowledge of the matter. 

The CoC doesn’t want the plan changed as suggested by the National Company Law Appellate Tribunal (NCLAT) because this will eat into their own payouts. Lenders could file a caveat in the Supreme Court if the NCLAT doesn’t budge on its proposal, said the people cited above. 

The CoC led by State Bank of India (SBI) is slated to meet on Friday to vote on whether operational creditors will get a bigger amount as proposed by the NCLAT. Also on the agenda is a vote on whether Standard Chartered will be given a share on a par with other lenders.

“Operational creditors and what to do with Standard Chartered’s dues are two issues in front of the CoC. It is unlikely that lenders will agree to give more because the amount the NCLAT has asked is too much,” said one of the persons cited above.

“We may have to file a review in Supreme Court if the NCLAT sticks to its suggestion.” 

1

NCLAT HEARING ON APRIL 9 

Four creditors with the largest exposure — SBI, IDBI Bank, ICICI Bank and Edelweiss ARC — have formed a core committee to take a decision on behalf of lenders. 

According to the proposal submitted by AreclorMittal, financial creditors led by SBI will get 92% of their dues, which comes to around Rs 41,987 crore of a total Rs 49,395 crore. Operational creditors will get just 5% or Rs 214 crore against the outstanding Rs 4,976 crore. 

Unlike the Indian banks, Standard Chartered Bank had not loaned funds to the parent company but its subsidiary and did not have first charge of its assets. It had voted against the CoC resolution, saying that it was discriminatory. 

While approving ArcelorMittal’s Rs 42,000-crore resolution plan, the Ahmedabad bench of the National Company Law Tribunal had asked the CoC to consider revising its distribution to pay all financial creditors on a pro-rata basis and use 15% of the Rs 42,000-crore upfront payment to pay operational creditors with dues over Rs 1 crore. Distributing the amount on a pro rata basis would also give Standard Chartered a larger share than 1.7% or Rs 60 crore of its Rs 3,500 crore dues, which is what it would get under the current plan. 

“15% of the Rs 42,000 crore is more than Rs 6,000 crore and if we include Standard Chartered also, our share will come down substantially. Not all are agreeing to this proposal,” said the person cited above.

The Economic Times reported

BS: NCLT reads insolvency rules at Orchid Pharma’s promoter group firm

29 March 2019: The insolvency resolution procedure will be applied on Orchid Healthcare, a promoter group company of Chennai-based Orchid Pharma, which is already under this procedure.   

The order, from the bench of the National Company Law Tribunal, was in response to a petition from IDBI Bank. It had loaned Rs 191 crore in July 2014 to Orchid Pharma, for which Orchid Healthcare was guarantor. 

The bank’s dues, by July 2018, were Rs 215.7 crore (a consortium of 24 banks had lent a total of about Rs 3,200 crore to the drug maker). With the borrower not repaying and also under the Corporate Insolvency Resolution Procedure, the petition from IDBI asked that this be also initiated on Orchid Heal­thcare. Noting there was no objection from the company, the tribunal’s bench of B S V Prakash Kumar and S Vijayaraghavan has agreed to the request. And, appointed an interim Resolution Profes­sional.
Orchid Healthcare has 22.64 per cent stake in Orchid Pharma, the biggest shareholder in the promoter group, as on end-December, according to the BSE. Orchid Pharma has been under financial stress for some years
The NCLT appointed an IRP for it with effect from mid-August 2017, on a petition from an operational creditor, Lakshmi Vilas Bank. Later, the Committee of Creditors (CoC) approved a resolution plan of US-based Ingen Capital, though with a significant haircut (dues write-off). However, Ingen did not pay the required amount and the NCLT nullified that resolution plan, on the RP’s request.
Earlier this month, the RP called for a fresh Expression of Interest (EoI) from those interested, on a resolution plan for Orchid Pharma. The tribunal, through the order, also allowed 105 days for the CIRP, considering the time lost from the date of the previous EoI, of mid-November 2017, to the date of annulment of the approved resolution plan of Ingen. It has also reinstated the RP and the CoC, to ensure the company stays a going concern.

The RP has told the tribunal that it has e-mails from Divi’s Laboratories, Gland Celsus Biochemicals and Fidelity Trading Corporation. And, oral enquiries from ART Capital (India), Everstone Group, Aion Capital, Piramal Capital and Finquest Group, expressing interest in proposing Resolution Plans. 

The Business Standard reported

TTI: Liberty gets last call to clear Adhunik dues

29 March 2019: Liberty House Group plans to meet the 30-day deadline, set by the appellate company tribunal, to cough up a Rs 410-crore upfront payment to the lenders of bankrupt steel maker Adhunik Metaliks Ltd.

The London-based company has been provided this “one opportunity” by the National Company Law Appellate Tribunal to close the transaction by April 14, failing which the lower tribunal may pass an “appropriate order in accordance with law”. Sources close to Liberty said the company was “working hard” to complete the deal as directed by the court. 

Sanjeev Gupta had made audacious bids for several bankruptcy facing companies such as Amtek Auto and ABG Shipyard. Even though it was selected as successful resolution applicants in several of them, the company has not been able to cross the line in any case.

The March 15 order of the NCLAT, which also rejects the plea of MSTC that demanded Rs 108.36 crore as “resolution process cost”, provides a window now to Liberty to start a well-sized metal business in India.

Shifting timetable

According to a previous order of NCLT Calcutta, Liberty House had to make an upfront cash payment of Rs 410 crore to the secured financial creditors, who collectively had a Rs 5,371.23-crore claim on Adhunik, by September 12.

However, the company deferred the payment and sought time from the Calcutta bench, as it wanted a “clean asset”, referring to the legal challenge mounted by MSTC.

State-run MSTC was listed as an operational creditor having a claim of Rs 108.36 crore on Adhunik. It had supplied iron ore, coal and other raw materials to the debt-laden company.

MSTC had objected to Liberty’s resolution plan approved by the CoC. The UK company is paying Rs 30 crore against a combined claim of Rs 273.27 crore by the operational creditors.

While the legal wrangle ensued, the committee of creditors, led by the State Bank of India, informed the Calcutta tribunal it was willing to start the resolution afresh. 

The creditors showed a letter from the second-highest bidder Maharashta Seamless, agreeing to take over Adhunik. 

The matter finally landed at the NCLAT which rejected the MSTC plea and allowed Liberty time to pay the dues. It is not yet known if MSTC will challenge the order at the Supreme Court.

The Telegraph India reported