LM: Bank of Baroda buys ₹3,000 crore DHFL loans

30 June 2019: Bank of Baroda (BoB) has entered into a transaction with Dewan Housing Finance Corp. Ltd (DHFL) to acquire loans worth ₹3,000 crore against its exposure to the non-bank lender, even as a lenders’ consortium to the stressed non-bank lender considers a resolution plan, two people aware of the development said.

BoB acquired the pool of loans made by DHFL and adjusted it against its loans to the non-bank lender, the people said, requesting anonymity. Since the acquired loans are higher-rated assets, the quality of BoB’s loanbook will improve.

“Now DHFL will only act as a collection agent for the bank for these loans. The bank will keep around 85-90% of the repayments to itself and the rest will go to DHFL,” one of them said.

Since BoB had an exposure of close to ₹6,500 crore to DHFL, this will be pared by a little less than ₹3,000 crore, the second person said.

“Securitization of assets often happens, but what is different in this case is that the borrower, instead of using the money for liquidity needs, is using it to cancel future term loan repayments,” a banking analyst said on condition of anonymity.

Purchases of loan pools by banks help inject liquidity into non-bank lenders. Banks often buy loans from shadow lenders comprising securitized retail loans to meet priority sector lending shortfall.

State Bank of India (SBI), the country’s largest lender, has an exposure of about ₹10,000 crore to DHFL, the bank’s chairman, Rajnish Kumar, told shareholders at its annual general meeting in June.

Other lenders to DHFL include Bank of India, Central Bank of India, Andhra Bank, Canara Bank, Punjab National Bank and Corporation Bank.

As of December, the non-bank lender had an outstanding debt of ₹1 trillion, of which 38% was in the form of bank loans, 47% from debt markets and 10% through deposits.

Emails sent to DHFL and BoB seeking comments remained unanswered till press time.

“This transaction has not been done as a consortium, but was only between Bank of Baroda and DHFL,” the second person said.

News agency PTI reported on Friday that lenders would take a call on their exposure to the stressed NBFC sector in the light of the Reserve Bank of India’s 7 June circular, which laid down guidelines for resolution of bad loans. “Resolution of any stressed assets either of NBFC or any other sector will be as per the June 7 guidelines of the RBI,” the report cited Kumar as saying.

On 4 June, DHFL delayed interest payment on non-convertible debentures worth ₹850 crore, following which its credit rating was downgraded to default by rating agencies Crisil and Icra. DHFL subsequently was able to make the interest payment within a seven-day grace period given by the bond holders.

On 25 June, DHFL said in a regulatory filing that it was yet to repay ₹225 crore of the total ₹375 crore worth of commercial paper to 12 investors. Since September, DHFL has met liability obligations of over ₹41,000 crore, it said in the same filing.

Mint reported on 20 June that DHFL sold ₹2,000 crore worth of its loan portfolio to offshore investors in a transaction led by SC Lowy, a banking group based in Hong Kong, citing two people aware of the development.

Since December, it has also sold stakes in several of its strategic assets, including affordable housing arm Aadhar Housing Finance Ltd, educational loan business Avanse and DHFL Pramerica Asset Managers. In January, it sold ₹1,375 crore of wholesale loans to foreign alternative investment management fund Oaktree Capital, which buys distressed loan portfolios at a discount.

As of 31 March, DHFL’s promoters include Wadhawan Global Capital Ltd (37.3%), Aruna Rajeshkumar Wadhawan (0.76%), Dheeraj Rajeshkumar Wadhawan (0.57%) and Kapilkumar Wadhawan (0.57%).

The LiveMint reported

BT: Lenders approve JSW Steel’s bid to acquire stressed ACCL for Rs 1,500 crore

30 June 2019: The SBI-led committee of creditors of Asian Colour Coated Ispat Ltd (ACCL), which has an outstanding debt of over Rs 5,000 crore, has approved JSW Steel’s Rs 1,500-crore bid to acquire the stressed steel company. Most of the money will go to financial creditors. Top lenders of debt-ridden ACCl include the State Bank of India, Bank of Baroda, Punjab National Bank and IDBI Bank. Some other banks and financial institutions also have exposure to the company.

ACCL had filed for insolvency in July 2018 after the National Company Law Tribunal (NCLT) admitted a resolution application filed by the State Bank of India-led consortium. As per PTI, a report submitted by Resolution Profession Kuldip Bassi, who was supported by Ernst & Young, had confirmed ACCL’s admitted debt at Rs 6,500 crore. Over 80 per cent of the committee of creditors voted in favour of the JSW Group bid.

Asian Colour Coated Ispat Limited (ACCIL) has manufacturing facilities across three strategic locations in close proximity to Delhi and Mumbai and caters to markets across the Gulf, Europe, Africa, Latin and North America besides India.

The action continues unabated in the steel industry. In July 2018, JSW Steel and AION Investments Private II Limited had acquired cash-strapped Monnet Ispat and Energy Limited — one of the twelve corporate defaulters listed by the Reserve Bank of India for heavy loan defaults — through the NCLT resolution process for Rs 2,850 crore. Sajjan Jindal-led JSW Steel had reported a sharp fall of 48 per cent in consolidated net profit at Rs 1,495 crore for the fourth quarter ended March 31, 2019, due to increase in expenses. 

The BusinessToday reported

LM: NBCC ‘no more interested’ in Jaypee Infra acquisition

30 June 2019: Although the distressed home buyers of Jaypee Infratech Limited (JIL) are urging the government to intervene in the resolution process of the bankrupt realty firm in support of NBCC’s bid, the public sector construction major, according to sources, is no more interested in acquiring JIL and its stalled projects.

After the latest round of voting, whereby NBCC’s bid was rejected as the banks led by IDBI Bank voted against it, the management in the state-run company is not enthusiastic about moving ahead on that front as there is no “possible chance of unanimity among the home buyers and the banks,” sources said.

“Such are the differences that, if the banks are ‘north pole’, home buyers are ‘south pole’. The only possible way forward for Jaypee seems to be liquidation,” said an NBCC official.

“We are not aggressive. If we were aggressive, our lawyer would have been there at the NCLAT now,” the official added.

Further, change in guard at the ‘Navratna’ company has also impacted its approach towards the bankrupt JIL, people in the know of things said.

NBCC Chairman Anoop Kumar Mittal, who was known to be bullish with his intention to acquire JIL, relinquished his office in March 2019 after the government denied extension of his service till his date of superannuation in January 2020.

Another bureaucrat, Shiv Das Meena, assumed the office of Chairman-cum-Managing Director, NBCC (India), with effect from April 5, 2019.

Home buyers, on the other hand, have off late protested and written letters to the Prime Minister, Finance Minister and the Housing and Urban Affairs Minister asking the government to direct the IDBI Bank to accept the NBCC bid.

The bid to acquire the insolvent JIL was put to vote from May 31 to June 10 and a majority of the lenders, led by IDBI Bank, voted against the bid on the grounds that it was conditional. Home buyers, however, were in favour of the bid.

The NBCC’s bid seeks the cancellation of an estimated income tax liability of ₹33,000 crore due over a period of 30 years under the concession agreement for the transfer of land from the Yamuna Expressway Industrial Development Authority to JIL.

After the last round of voting, Adani Infrastructure and Development (AIDPL), which in April had shown interest in acquiring Jaypee Infratech’s assets, earlier this week said that it would complete the stalled projects in four years time if it is allowed to take over JIL. This is the second time Adani group has shown interest in acquiring the insolvent company.

In the committee of creditors’ (CoC) meeting on June 20, the offer was discussed and it was decided that resolution professional (RP) Anuj Jain would inquire from AIDPL about the completion timeline.

The CoC is likely to issue fresh expressions of interest (EoI) for JIL after the National Company Law Appellate Tribunal’s (NCLAT) hearing on the IDBI Bank’s plea over NBCC bid on July 2.

The LiveMint reported

BS: Air India pilots body demands payment of Rs 1,200 crore arrears ahead of carrier’s disinvestment

30 June 2019: Air India Executive Pilots Association has written to Chairman and Managing Director Ashwani Lohani, demanding the payment of their arrears amounting to Rs 1,200 crore.

“We are reliably informed that in order to effect the disinvestment process of the company and its subsidiaries, the government of India has sought certain specific financial details of Air India Ltd and its subsidiaries to prepare the audited accounts for 2018-19 which is to accomplish by the end Of June 2019,” executive pilots of the widebody (WB) cadre wrote in the letter.

The letter reads: “Arrears of WB pilots for the period 1997 to 2006 arising out of the revision of wages for the pilots, with effect from 2007 and the 25 per cent of wages that are withheld by the company for all employees from August 2012 onwards is due.”

“This would amount to a current liability of Rs 1,200 crore with a principal amount of Rs 1 crore on an average owed to each pilot,” the letter adds.

A few days ago, Minister of State for Civil Aviation Hardeep Singh Puri had told ANI that the Centre was committed to the disinvestment of the national carrier.

The pilots’ body has also threatened to move to the National Company Law Tribunal (NCLT) to recover their dues in case the airline does not pay it before the privatisation process starts.

“It may be pertinent to paint out that leaving any scope for litigation prior to disinvestment, initiated individually or collectively by pilots, arising out the non-payment of the above mentioned must be avoided as it would adversely add to the company’s contingent liabilities and potentially, the future cumulative interest burden on the divested Company,” reads the letter.

The body has as many as 106 pilots as members, considered to be very experienced pilots of the national carrier. These pilots are usually deployed for long haul flight like Boeing 777 and Boeing 787 Dreamliner aircraft.

The Business Standard reported

BS: McLeod Russel auditor Deloitte concerned over company’s solvency

30 June 2019: McLeod Russel auditor Deloitte Haskins & Sells LLP has raised concerns over the company’s ability to remain in business unless its loan restructuring application with lenders receives a favourable response.

According to Deloitte, the Williamson Magor Group company’s liabilities exceeded assets by Rs 1,435.66 crore as on 31 March, 2019 and in the last financial year, it was unable to discharge its obligations for repayment of loans and settlement of other financial and non-financial liabilities including statutory liabilities.

While giving an adverse opinion on this company primarily on account of recovery of inter-company deposits (ICD), the auditor stated that the tea producer is currently in discussion with lenders for carrying out a refinancing proposal.

Stating that there are indications of a “a material uncertainty which cast a significant doubt on the company’s ability to continue as a going concern”, the auditor said, “The ability of the company to continue as a going concern is solely dependent on the acceptance of the refinancing proposal, which is not wholly within the control of the company”.

Explaining the basis of adverse opinion, Deloitte Haskins & Sells claimed that as on March 31, 2019, ICDs of Rs 1,744.68 crore were given to promoter group companies and other companies while Rs 77.03 crore has been accrued as interest. These ICDs as well as the interest income are doubtful of recovery, considering the financial condition of WMG and other companies to whom these ICDs were given.

Moreover, McLeod Russel didn’t make any provision for the outstanding amounts recorded as ICDs and interest accrued thereon.

“Consequently, the noncurrent portion of loans and interest accrued thereon are overstated and loss for the year is understated by Rs. 1821.71 crore”, the auditor said.

On a standalone basis, McLeod Russel has claimed to have incurred a loss of Rs. 4.41 crore in the last fiscal year while reported a profit of Rs. 38.82 crore on a consolidated basis.

Moreover, the auditor said that McLeod Russel recognised Rs. 67.82 crore as sundry income from one of the promoter group companies.

“In our opinion and according to the information obtained by us, the sundry income may have been funded to the said promoter group company through monies indirectly lent by the company and therefore may not have been actually realised. These therefore may have been reflected only by book entries and prejudicial to the interest of the company” the report from the auditor stated.

Calls to K K Baheti, the chief financial officer and director at McLeod Russel went unanswered.

The auditor has also stated that the financial statement prepared by the company is not in accordance with the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as modified by a circular and does not give a true and fair view in conformity with the aforesaid Indian Accounting Standards and other accounting principles generally accepted in India.

For the year ended March 31, 2019, McLeod Russel reported nearly 20 per cent decline in its total income at Rs. 1960.23 crore and 82 per cent fall in its net profit at Rs. 38.82 crore. It has been selling its estates to pare debt and is estimated to have received Rs. 940 crore from the sale proceeds.

On June 29, Price Waterhouse & Co Chartered Accountants LLP quit as the auditor of another WMG company Eveready Industries citing its inability to obtain sufficient audit evidence on Eveready Industries’ ICD and its recovery.

Besides, on May 31, Deloitte Haskins & Sells and V Singhi & Associates, the auditors of McNally Bharat Engineering, another WMG entity raised concerns over this firm’s ability to remain in business unless a financial restructuring proposal with the lenders is approved.

The Business Standard reported

BS: Rohit Ferro gets breather to push debt settlement with bankers

30 June 2019: Ferro alloy maker Rohit Ferro- Tech Ltd has got some breathing time following the NCLT’s rejection of an insolvency resolution petition and now expects to revive the debt settlement with the bankers.

The Kolkata bench of the National Company Law Tribunal (NCLT) has rejected the State Bank of India’s petition seeking resolution under provisions of the Insolvency and Bankruptcy Code (IBC) for their debt exposure of Rs 1792.12 core in Rohit Ferro.

SBI accounts for around 50 per cent of the total debt exposure of financial creditors in the company.

“Among all the lenders, SBI had approached the NCLT for a resolution for their dues. The NCLT turned down their petition and it has given us some breather to revive the company,” Rohit Ferro managing director Ankit Patni told PTI.

“Now, we are hopeful that bankers will come forward and revive the settlement plan we had already submitted with them,” he said.

Declining to divulge details of the settlement plan, Patni said it includes capital infusion from the promoters.

A winding-up petition, pending in court, was filed by operational creditors and not financial creditors, Patni said.

Out of four plants of Rohit Ferro, only two are operational now.

The Bishnupur unit for stainless steel is operational and the one at Jajpur for ferro alloy is operational at a capacity of about 50 per cent.

The company’s total installed capacity for ferro alloy is 2.74 lakh tonne and stainless steel of 1 lakh tonne.

It reported Rs 278.58 crore loss for 2018-19 from a revenue of Rs 892.83 crore from operations.

But, auditors in their note of 2018-19 results pointed out non-recognition of interest expenses provision and if the same is included, the loss would have been Rs 532 crore instead of Rs 278.58 crore as reported.

The Business Standard reported

NIE: Gaping holes in Odisha government’s mine auction plan

30 June 2019:   As the state government is clearing the decks for auction of at least 10 mineral blocks in July, officials involved in the process said this may not be possible for more than one reasons.

Casting doubt over the due diligence report prepared on each mining lease area to be auctioned, informed sources said there are many loose ends to tie.

“In some of the mines, whose lease period is expiring in 2020, the prospecting done by the lessees does not cover the entire area. This is due to several factors including lack of forest diversion. Status of mineral occurrence in these areas is not known,” the sources who did not want to be identified said.

The lease of 24 merchant mines is set to expire by March 31, 2020.

Under the Mines and Minerals (Development and Regulation) Amendment Act 2015, licences of expiring mines will not be renewed and the mines will be allotted on the basis of auction.

“While some lessees have surrendered part of their lease areas, the state government is yet to consider their request.

The leaseholders have not conducted exploration of the areas. The entire area has to be auctioned now as the surrender process is not complete yet,” said former Director of Mines BK Mohanty.

As per the amended provisions of MMDR Act, the leases have been given six months to dismantle the infrastructure and move out of the area.

This is simply not attainable since they will undertake mining till the last date of lease.

With pressure mounting on the government for early auction of the mines, the issue was discussed at high level meeting chaired by Steel and Mines Secretary RK Sharma here last week.

 A decision was taken to auction at least 10 mining blocks in July even if these blocks are not fulfilling all the parameters.

Exuding confidence of putting some mineral blocks under hammer, Steel and Mines Minister Prafulla Mallick said, “We have already chalked out plans to auction 5 to 10 out of 36 mineral blocks in July so that ore production is not hampered.”

He said 36 mining blocks are ready for auction out of which 12 are virgin.  Disruption of mining in the rest 24 mines will create chaos in the iron ore market in the country as they account for a sizeable percentage of production at the moment.

The state produces about 120 million tonnes of iron ore out of total national production of about 200 million tonnes.

As many as 16 out of 24 mines are of iron ore. These mines together produce nearly 60 million tonnes.

New Indian Express reported

FE: DHFL resolution: Lenders to start work as per RBI guidelines, says SBI chairman

29 June 2019: Lenders to the near-bankrupt Dewan Housing Finance (DHFL) may initiate a resolution process in line with the new stress assets resolution framework. Rajnish Kumar, chairman, State Bank of India (SBI), told FE on Friday it was now up to the lenders to decide on the resolution plan for DHFL based on the Reserve Bank of India’s June 7 circular on NPA resolution.

Meanwhile, the mortgage firm announced on Friday it was deferring the announcement of financial results for the March quarter to July13 citing ‘certain unforeseen operational engagements, including non-availability of a few directors’.

Given all lenders need to sign an inter-creditor agreement, or ICA, under which the resolution plan can be executed, the process may not be a smooth one, sources close to the matter said. Among the options that lenders have is to convert their loans into equity or even buy out the assets.

Money market experts say DHFL’s defaults expose lenders to both mark-to-market losses on bonds and to defaults or haircuts on loans. Some believe there could be a contagion effect. On Thursday, RBI noted that the failure of a large non-banking financial company could be as bad for the ecosystem as the failure of a big bank.

The mortgage financier has been unable to pay lenders on a couple of occasions inJune. On June 4, DHFL defaulted on interest payment of Rs 850 crore on its non-convertible debentures (NCDs), following which its credit rating was downgraded to default by rating agencies. Earlier this week, it defaulted to a clutch of 13 lenders and was able to only make a part payment of Rs 150 crore of the total dues of Rs 375 crore. The consortium of banks has not yet classified the exposure as a non-performing asset (npa). However, their loans of close to Rs 45,000 crore, about half the company’s total outstandings of close to Rs 1 lakh crore, appear to be in trouble.SBI is the largest lender to DHFL with an exposure of nearly Rs 10,000 crore, the bank told its shareholders during its annual general meeting (AGM).

DHFL is in the process of selling down its loan assets, including wholesale project loans; it has raised funds over the past few months — securitising retail loans worth Rs 30,000 crore. The lender also sold Rs 1,375 crore worth of wholesale loans to foreign investment management firm — Oaktree which buys distressed debt at a discount. DHFL had short-term borrowings of Rs 8,812 crore in FY18, which were twice as much as the Rs 4,268 crore in the previous fiscal, according to its annual report.

The Financial Express reported

FE: IL&FS panel to explore loan recast options

29 June 2019: The Uday Kotak-led board of IL&FS on Friday set up a six-member committee for exploring debt restructuring of at least five identified entities, sources told FE. The committee, which includes board members Vineet Nayyar, N Srinivasan and CS Rajan, will meet bankers over the weekend to discuss the same.

The board, which met on Friday, has identified entities, including IL&FS Tamil Nadu Power Company, Road Infrastructure Development Company of Rajasthan, West Gujarat Expressway, Jharkhand Road Project Implementation Company, for debt restructuring.

The objective of this restructuring is to secure at least the principal payment of all outstanding debt, including dues to pension funds, one of the people with knowledge of the matter said. “Next two-three days we will meet with bankers. We are trying to restructure loans so that we reach sustainable debt level. The total outstanding in some cases now may be higher than sustainable level,” the source said.

The source added: “We are trying to bring the lenders on board, to see if they can agree to adjust on certain terms of these loans — such as the interest rate or the tenure. We’re also negotiating if lenders can write off certain portion of the debt.”

In case of Moradabad Bareilly Expressway, which had in May been reclassified as “green” from its earlier “amber” classification, the board is planning to modify earlier terms so that pension funds also get their dues. Bankers have already agreed to make changes to the terms of repayment, the source added.

Under the Reserve Bank of India’s new prudential framework for stressed asset resolution, once a borrower is in default, lenders must undertake a “prima facie review” of the account within 30 days. During this period, lenders may decide on the resolution strategy. In case of the above identified projects, lenders have time till June 30 to make provision of these as stressed assets or restructure the loans, the source said.

Following an order passed by the NCLAT in February, the government-appointed board of IL&FS classified its group companies into green, amber and red. The 55 companies categorised as “green” so far can fully service their debt; 13 “amber” companies can only service their debt to senior secured financial and operational creditors and 82 “red” companies are unable to service their debt altogether.

The Financial Express reported

FE: Anil Ambani’s Reliance Infra’s Delhi-Agra toll road sale to close by August end

28 June 2019: Reliance Infrastructure (RInfra) on Thursday announced that it will close the sale of the Delhi-Agra toll road to Singapore-based roads and highway investment company Cube Highways and Infrastructure by the end of August.

The Anil Ambani-led company will receive an enterprise value of Rs 3,600 crore, including equity of up to Rs 1,700 crore from the sale, it said in a release.

The Delhi-Agra toll road is the 180-km six-lane toll road connecting Delhi and Agra on National Highway 2.

“Reliance Infrastructure will utilise 100% of proceeds only for debt reduction. With this single transaction of DA toll road, the debt of Reliance Infrastructure will reduce by over 25% to less than Rs 5,000 crore,” the release said.

The company had in March announced a binding share purchase agreement with Cube Highways for its 100% stake in the Delhi-Agra toll road.

Reliance Infrastructure has already applied for commercial operations date (COD) to the National Highways Authority of India (NHAI) for the project, the release said. The collection period of the toll road is until 2038.

“This sale will significantly reduce the debt of Reliance Infrastructure on its path to becoming a zero-debt company,” said Punit Garg, executive director and CEO, Reliance Infrastructure.

Recently, auditors of the company raised doubts about the ability of Reliance Infrastructure and its subsidiaries to continue as a going concern.

Cube Highways and Infrastructure is a company formed by Global Infrastructure Fund — I Squared Capital and a wholly-owned subsidiary of the Abu Dhabi Investment Authority.

The Financial Express reported