BQ: IBC: Axis Bank Joins SBI To Protest NCLAT Order On Essar Steel

11 July 2019: Private sector lender Axis Bank Ltd. also joined State Bank of India by going public with its displeasure on the recent National Company Law Appellate Tribunal judgement putting secured creditors at par with the operational creditors.

SBI chairman Rajnish Kumar had Wednesday gone public with his anguish on the same order of the NCLAT awarding higher payout to Essar Steel’s operational creditors and treating them on par with secured lenders and said the banks would challenge the order at the Supreme Court.

“The NCLAT order does beg the question if this is how the proceeds will be shared, then secured creditors will ask why is the need to go to the IBC and not wait for liquidation,” Axis Banks managing director and chief Amitabh Chaudhry told reporters.

He said it is still unclear on what is the formula which was adopted by the NCLAT while approving ArcelorMittal’s Rs 42,000-crore bid for the bankrupt flagship company of the Ruias-led Essar Group, which gave operational creditors equal status as the secured lenders.

Chaudhry said the banks will exercise their right of taking the matter to the Supreme Court and hoped clarity can emerge in the matter from the apex court.

The appellate tribunal said secured creditors would get only 60.7 percent of their Rs 49,473 crore claims as it ordered the rest of the money to be paid to operational creditors, treating them at par with the financial creditors.

“What has happened here is that secured, unsecured and operational creditors have been ranked equal,” Axis Bank’s chief of corporate lending Rajiv Anand said.

Drawing from the statutes, including the provisions in the Companies Act, SBI’s Kumar had pointed out that there was a distinction between secured and operational creditors, and that the former had a greater right on an asset at par with the employees of company facing bankruptcy resolution.

“If secured creditors are given the same treatment as operational creditors, then it is a huge disincentive for secured creditors and an incentive for operational creditors,” Kumar had said.

He also warned that with this ruling, bankers would be hesitant to use the IBC provisions for resolving bad assets till such a time that the principles of the law were clearly laid out and hoped that the Supreme Court would clarify the same once they challenge the Essar Steel order by the NCLAT.

BloombergQuint reported

LM: SBI puts up for sale two NPA accounts to recover dues of ₹309 crore

11 July 2019: State Bank of India has put up for sale two financial assets to asset reconstruction companies, NBFCs and other financial institutions to recover dues of more than ₹309 crore.

In terms of bank’s policy for sale of financial assets, the bank is placing Rajashree Sugars and Chemicals and Shree Vaishnavi Ispat for sale to banks/ARCs/NBFCs/FIs, it said in the expression of invitation for the sale process.

Rajashree Sugars and Chemicals has an outstanding of ₹226.94 crore towards the country’s largest lender while, Shree Vaishnavi of ₹82.52 crore.

The e-auction of Rajashree will take place on July 22 while that of Shree Vaishnavi on July 29.

The interested Banks/ARCs/ NBFCs/ FIs can conduct due diligence of these assets with immediate effect, SBI said.

The LiveMint reported

LM: Brookfield eyes majority stake in Suzlon

11 July 2019: Brookfield Asset Management Inc. is planning an offer for a majority stake in India’s debt-laden Suzlon Energy Ltd, according to people familiar with the matter.

The Toronto-based investment firm is working with a financial adviser for due diligence on Suzlon, the people said, asking not to be identified as the details are private. Brookfield proposes to start with buying new shares issued by the company, followed by purchasing stocks from the existing holders under an open offer, the people said.

As part of the proposed deal, the Canadian company is in discussions with Suzlon’s creditors to restructure the outstanding bank loans of more than ₹11,000 crore ($1.6 billion), under a so-called one-time settlement plan, the people said. Brookfield is demanding that the lenders led by State Bank of India (SBI) take a haircut of as much as 50% on the loans, they said.

Suzlon is in talks with several investors and Brookfield’s proposal is among the various options available, one of the people said. A binding offer from Brookfield could come as soon as the end of this month, another person said.

Shares of Suzlon rose as much as 5.3% in Wednesday afternoon trading. The stock has fallen 36% in the past year. A deal like Brookfield’s could be critical for Suzlon and its lenders as the firm’s ratings on its long-term bank facilities were downgraded at Care Ratings Ltd to D from BB in April. Suzlon has convertible bonds worth $172 million coming due on 16 July, data compiled by Bloomberg shows. Deliberations are ongoing, details of Brookfield’s proposal might change and the investment firm can decide against an offer at the end, the people said. A representative for Brookfield declined to comment. Representatives for Suzlon and SBI didn’t immediately respond to requests seeking comments. bloomberg

As reported on LiveMint