ET: Cox & Kings defaults on another CP; faces rating downgrades

1 July 2019: Cox and KingsNSE defaulted on yet another commercial paper on Monday, after the default last week, and saw a slew of ratings agency downgrades as it grapples with a liquidity crisis. 

In a late evening release on , it said it had defaulted to the extent of Rs 50 crore, out of Rs 65 crore CP maturing on Monday. 

Separately, it also said Brickworks and Care Ratings downgraded various instruments of the company. Care Ratings downgraded the company’s Rs 375- crore CPs to ‘D’ rating from A+, and Rs 1,685 crore CPs to A4 from A+.

Brickworks cut rating on the company’s Rs 375 crore CPs and Rs 1,685 crore CPs to ‘D’ from A1+ earlier. 

Care also cut the non-convertible debentures (NCD) ratings, long-term facilities, and issuer rating of the company to BB from AA-. Brickworks also cut Rs 50 crore NCD rating to C from AA-. 

“The working capital situation at Cox & Kings stretched in the last few months and was further impacted due to its inability to replace the short term loans with long term loans / regular working capital lines,” Cox and Kings said in a press release.

“The company is taking all required measures to resolve the temporary cash flow mismatch. It is evaluating each business and identifying ways to improve operational performance. The company is focusing on cash flow generation from each business and working at the highest priority to free working capital,” it said. 

The company said it will also be approaching its lenders to work out some time bound program to meet this emergency. 

On Thursday, Cox & Kings had said it failed to meet a debt repayment obligation towards maturity of unsecured commercial papers on June 26. Out of an aggregate amount of Rs 200 crore, the company managed to pay Rs 50 crore while the balance amount of Rs 150 crore remained unpaid, the company said. 

The Economic Times reported

ET: Over 400 home buyers suggests COC considers Jaypee’s proposal

1 July 2019: Over 400 Jaypee homebuyers suggested that COC considers the proposal made by Jaypee Group under section 12A.

They conducted a candle light march at India gate on Sunday to urge the authorities to expedite the completion and delivery of their flats in the beleaguered project.

Buyers are demanding an end to the time consuming litigation process.

The homebuyers have made written appeals to the Finance Minister and the Minister of Housing and Urban Affairs in India demanding COC should look beyond NBCC to deliver homes. They also said that no bidder should be allowed to make any conditional bid and hold homebuyers as hostage.

They also suggested that IDBI should take more time from NCLAT for resolution and finally accept the meritorious proposal after considering all the aspects of Jaypee.

The Economic Times reported

BS: JSW sweetens offer to surge past Vedanta in race for Ind Barath unit

1 July 2019: JSW Energy, part of the Sajjan Jindal controlled JSW Group, has stolen a march over metals and mining titan Vedanta Ltd in the bid to acquire insolvent firm Ind Barath Energy Utkal Ltd (IBEUL), a subsidiary of the Hyderabad-based Ind Barath Power Infra Ltd (IBPIL).

IBEUL has a 700 Mw coal-fired pit-head power plant near Jharsuguda (Odisha). The company has been admitted to the Hyderabad bench of the National Company Law Tribunal (NCLT) under Insolvency & Bankruptcy Code (IBC). Both JSW Energy and Vedanta are in the race to acquire the insolvent firm. 

Initially, both JSW Energy and Vedanta were neck-to-neck in bidding for IBEUL. Both companies offered an upfront amount of Rs 1 crore per Mw. But of late, JSW Energy has sweetened the offer and hiked its upfront offer to Rs 845 crore against Vedanta’s Rs 700 crore, a source familiar with the development said.

The resolution of IBEUL, a stressed power asset is expected to be completed by September this year.

For JSW Energy, the takeover of IBEUL facility sounds strategic since the company is scouting for such portfolios to boost its inorganic growth. While the company is keen to expand its hydroelectric and renewable portfolios organically, it is banking on the inorganic route to build up thermal power. Moreover, JSW Energy does not need external capital to fund its stressed power deals as it has ample internal accruals for such buy-outs. 

The country’s power sector is awash with stressed  assets. The ailing power assets, fired by coal and natural gas, add up to 34 with an installed capacity of over 40,000 Mw and are saddled with debt mounting to Rs 1.74 trillion, according to a report by a Parliamentary standing committee. 

However, the resolution of these assets is beset with challenges since most of them lack firm coal linkages and a long-term power purchase agreements (PPA). In contrast, IBEUL is an attractive bet as it boasts of both. It has coal linkage from Mahanadi Coalfields Ltd (MCL), a Coal India subsidiary and PPAs stitched with the governments of Odisha and Tamil Nadu. 

IBEUL is almost entirely owned by Australia-based asset manager Macquarie Group which has over 99 per cent stake in the company. Paradoxically, it was Macquarie which dragged IBEUL into NCLT in June 2018 owing to a delay in commissioning of the project. In 2015, Macquarie had lent Rs 750 crore to IBEUL against convertible bonds. Two years later, Macquarie is believed to have converted the debt instrument into equity, thus acquiring a majority ownership. IBEUL’s promoters had contested Macquarie’s petition in NCLT, arguing that the investor being a majority shareholder was not eligible to file for insolvency proceedings.

IBPIL, the Hyderabad based diversified power generator and parent company of IBEUL, has 2865 Mw of assets under development in conventional and non-conventional energy.

The Business Standard reported

ET: NCLAT directs NCLT to decide on IBC plea against JP Associates in 6 weeks

1 July 2019: The NCLAT Monday directed the National Company Law Tribunal to decide the insolvency plea filed by ICICI Bank against Jaiprakash Associates in six weeks.

The private sector lender had approached the National Company Law Appellate Tribunal ( NCLAT), seeking a direction to NCLT Allahabad-bench to expedite the hearing on its insolvency petition against Jaypee Group firm Jaiprakash Associates Ltd (JAL).

Hearing the matter, a three-judge bench of the NCLAT headed by Chairman Justice S J Mukhopadhyaya directed the NCLT Allahabad to decide on admitting the plea preferably in six weeks.

In September 2018, ICICI Bank had filed a petition before the NCLT Allahabad bench seeking to start insolvency proceedings against JAL, which is into infrastructure and real estate space.

In its plea before the appellate tribunal, the bank had submitted that there has been no progress in its petition filed before the NCLT Allahabad in last nine months.

JAL’s subsidiary Jaypee Infratech is already going through corporate insolvency resolution process (CIRP).

According to the bank, JAL owes around Rs 1,296 crore and it had approached the NCLT to recover the dues by filing an insolvency plea against JAL, under section 7 of Insolvency & Bankruptcy Code ( IBC).

However, JAL challenged the petition before the Allahabad High Court but the same was rejected. JAL then moved the Supreme Court, which too refused to stay the application.

The Economic Times reported

BQ: Three Chinese Lenders Look To Sell RCom Loans Ahead Of Insolvency Resolution

1 July 2019: Chinese lenders to Reliance Communications Ltd, including China Development Bank, Exim Bank of China and Industrial & Commercial Bank of China, are in the midst of negotiations with foreign funds to sell their loan exposures to the insolvent telecom firm, two people in the know confirmed.

The three lenders have a total exposure of over Rs 15,000 crore to RCom, undergoing insolvency proceedings. RCom owes more than Rs 49,000 crore to all its financial creditors, according to data provided by the resolution professional of the company.

The Chinese lenders have been in talks with U.S. based fund Varde Partners and other distressed asset investors such as SC Lowy Financial HK Ltd. and Bank of America Merill Lynch for the sale of these loans. Discussions were first initiated six months ago but a deal has not yet been struck, the people quoted above said.

During the initial talks, investors were negotiating a valuation of about 40-50 cents to the dollar, implying a 50-60 percent haircut for banks, said one of the people quoted above. However, the negotiations took a turn for the worse after Rcom was admitted for insolvency. Investors are now willing to offer only 15-20 cents to the dollar, leading to a much larger haircut of 80-85 percent for lenders.

Negotiations on a possible sale are continuing, the people quoted above said. CDB, Exim Bank of China, ICBC, SC Lowy and Bank of America Merrill Lynch did not respond to queries mailed on Friday. A spokesperson for Varde Partners said that the company has no comments to offer.

Why Chinese Banks Want To Exit?

RCom and its Chinese lenders have had a contentious relationship for over two years now. The loans to RCom were originally given as part of an arrangement where the telecom company would use the funds to purchase equipment from Chinese manufacturers.

In 2017, when the domestic banks were working on a restructuring proposal for the telecom company, the Chinese lenders decided that they did not want to participate.

In June that year, the domestic banks agreed to restructure RCom under the strategic debt restructuring route, since that allowed banks a standstill arrangement for 18 months. Under such a standstill arrangement, banks would not need to classify the account as a non-performing asset. The lenders would also be required to temporarily take over majority equity in the company, so that they may sell the company to a new investor.

The Chinese lenders, however, were not keen to use this route and preferred to refer the company for insolvency. By November 2017, CDB filed an insolvency petition against RCom at the Mumbai bench of the National Company Law Tribunal (NCLT).

According to the first person quoted above, the case was eventually withdrawn after domestic lenders intervened, convincing the Chinese banks that their dues would eventually be returned. BloombergQuint could not determine whether Indian lenders gave any implicit guarantee to Chinese banks.

In December 2017, RCom entered into an agreement with Mukesh Ambani’s Reliance Jio to sell its telecom assets. This gave the lenders some hope. By December 2018 however, it had become clear that the sale was not progressing as expected due to delay in regulatory clearances. RCom and Reliance Jio eventually called off the sale agreement.

According to the first person quoted above, the Chinese lenders were also closely watching the events unfolding at another stressed telecom company, Aircel Ltd, which was also undergoing insolvency proceedings. Lenders had to take a 99 percent haircut to their loan exposures in the case of Aircel. CDB had an exposure of Rs 2,700 crore to Aircel, which had to be mostly written off.

This experience has given the Chinese lenders more reason to try and exit their loan exposure to Rcom before the insolvency process is completed.

So far, the resolution professional for RCom has collated and disclosed all the claims made by financial and operational creditors to the company. The resolution professional will soon put out a request for expression of interest from interested bidders.

The BloombergQuint reported

ET: IL&FS board shortlists firms to recast its books

1 July 2019: After the Serious Fraud Investigation Office (SFIO) took a strong view against the big four audit firms, the board of IL&FS has shortlisted Indian firms to reopen and recast IL&FS’ books and the mandate for the job is likely to go to Borkar & Muzumdar and GM Kapadia and Co.

The recast is expected to be completed in three months once the matter is conformed. Since the Ministry of Corporate Affairs and the SFIO have taken a strong view against some of the big four agencies that were auditors to IL&FS and are being probed for their role in not being able to raise the red flag, the choice may fall upon Indian firms from a list of potential firms available with the board.

“Borkar and Muzumdar would be auditing IFIN and IL&FS while GM Kapadia would be auditing ITNL accounts for the past five years from FY13-FY18,” a person aware of the matter said on condition of anonymity.

The IL&FS board has already shared its recommendations with the MCA, which in turn will seek the court’s approval, the person said. An IL&FS spokesperson declined to comment on the development. This move by the board follows the Supreme Court order on June 4, 2019, allowing the company to reopen and recast past five-year books of accounts to ascertain the extent of irregularities by the erstwhile management in case of IL&FS, IFIN and ITNL.

NCLAT had already approved the reopening and recasting of accounts of IL&FS and group companies but it was challenged in the Supreme Court, which was vacated by the apex court recently.

This move of completing the recast in a time-bound manner will also help in divesting assets in these companies, as the bidders would be able to take an informed, call-based decision on the revised audited accounts of the company, the person cited earlier said.

The board has already announced divestment of various businesses, including roads, which are in various stages of due diligence by companies that have participated in the expression of interest process. It has raised funds by selling renewable energy business. Stake sale in seven wind energy SPVs is in the final stage after Japan’s Orix has conveyed its decision to match Gail’s offer.

Last week, the board reviewed the progress on divestment of all domestic and overseas assets and decided to constitute a six-member empowered committee — including four directors Vineet Nayyar, CS Rajan, Bijay Kumar, N Srinivasan, and COO N Sivaraman — to discuss and finalise the asset-wise framework of resolution with lenders. The board also decided to allow the bidders for toll road assets to jointly monitor traffic data and assess the revenue stream.

The Economic Times reported