ET: Goldman Sachs and SSG in talks to buy RattanIndia bad loans

5 June 2019: Goldman Sachs Group Inc and Asian distressed credit specialist SSG Capital Management are in separate talks to buy about Rs 2,500-3,500 crore worth of bad loans at RattanIndia Power, where lenders are planning to sell a part of their exposure to the debt-laden energy firm in the current round of negotiations.

In September last year, state-run Power Finance Corp (PFC) filed an insolvency plea against Rattan India Power, formerly known as Indiabulls Power, to recover unpaid dues. The company has defaulted on about Rs 20,000 crore of loans. Besides PFC, lenders to Rattan India include State Bank of India, Bank of India, Axis Bank, Bank of Baroda, and IDBI Bank.

There are other contenders for the portfolio besides the two private-equity financiers, two finance industry executives aware of the talks told ET.

“We are negotiating and hope to see some portion of the debt taken over,” said one of the persons cited above. “This would be big relief to the lenders as they are struggling to find a solution for such cases in the energy space.”

Goldman Sachs, SSG and RattanIndia Power didn’t respond to ET’s mailed queries until the publication of this report.

RattanIndia has two under-construction thermal power plants at Nashik and Amravati in Maharashtra.

Financing of power assets and recovery of loans stuck in these projects have become rather challenging after the Supreme Court struck down a crucial central bank order, which had given defaulting companies 180 days to concur on a resolution plan with lenders or face bankruptcy courts for unpaid debt of at least Rs 2,000 crore.

Goldman Sachs has been active of late in India’s special situations space. ET reported on May 29 that Goldman is in talks to buy up to Rs 2,000 crore exposure of the Piramal Group in real-estate firm Lodha Developers, which builds top-end properties in Mumbai and downtown London.

Founded in 2009 by Edwin Wong, Andreas Vourloumis and Shyam Maheshwari, former top Lehman Brothers bankers, SSG manages more than $2 billion across Asia. The firm focuses on assets in China, India and Southeast Asia. SSG is seeking to raise another $2 billion special situations fund to invest across its focused territories in Asia.

Private equity funds and special situation credit specialists are scanning the Indian landscape to buy into one of the world’s largest distressed debt markets. India’s banking sector, dominated by state-run lenders, is seeking to extricate about $210billion stuck in bad loans, the central bank’s recent estimates showed.

“New asset classes, such as Alternative Investment Funds and distressed-asset management, have increasingly gained traction in the Indian market, aided by government regulations and tax breaks,” Bain & Co said in its India Private Equity Report in May.

The Economic Times reported

EQUITY UPDATE – 24 JULY 2012

ASIA

Sinopec – Oil refining co. is to purchase a 49 percent stake in UK subsidiary of Talisman Energy Inc. for USD 1.5 b. The deal would provide Sinopec with access to oil fields in the North Sea. (Reuters)

INDIA

Consumer price index based on inflation for agriculture labourers stood at INR 8.03 per cent in June vs. previous 7.7 per cent in May. Rural labourers, all India CPI inflation at 8.54 per cent in June vs. 8.11 per cent in May. (The Hindu Business Line)

FII’s made gross purchases of INR 1,530.54cr and sales of INR 1,421.37cr. DII’s made gross purchases of INR 701.25cr and sales totalled INR 1,055cr. (Business Standard)

Pharmaceutical Co.’s – Inter-ministerial group is likely to come up with a final decision on FDI in pharmaceutical sector on 24 July 2012. (MoneyControl)

EUROPE

The Spanish stock market regulator CNMV has banned short selling of listed stock for three months, in order to maintain financial stability. The regulator cited extreme volatility across European markets had chances of interfering with smooth functioning and normal activities. In other news Spain’s 10 year borrowing rate rose by 0.21 per cent to close at 7.43 per cent. After having reached a high of 7.51 per cent; its highest level since 1999. According to market experts these high rates were unsustainable, as Spain will find it difficult to fund itself and will likely need a financial rescue. (Economic Times/AFP/Boston.com/AP)

The IMF dismissed its weekend report of refusing to support Greece, instead it will help Greece to overcome its economic difficulties. (Economic Times/Reuters)

Joh A Benckiser – Co. is to acquire US based coffee and tea maker Peet’s Coffee & Tea Inc. for USD 1 b. The co. offered to pay USD 73.50 a share, representing a 30 percent premium over Friday’s closing price. (Bloomberg)

NORTH AMERICA

Yields on government bonds declined to record lows, stocks declined in trade and the euro traded at its lowest to the dollar on the intensifying eurozone crisis. US Treasury yields for the 10 yr notes declined to 1.43 percent, touching record lows of 1.40 percent. German 2-yr bonds saw yields as low as -0.08 percent. Yields on Spanish and Italian bonds rose higher as investors were concerned about the stability of these countries. Euro declined to other currencies such as the US Dollar as news of more than expected Spanish regions asking for financial aid from the government. (Bloomberg)

According to a Citigroup Inc., the U.S Fed’s decision to purchase Treasury securities could end up leaving private investors without any instruments to purchase. Ben Bernanke, could in turn, purchase mortgage-backed securities or use additional tools for easing. (Bloomberg)

Genesee & Wyoming Inc – Co. is to acquire RailAmerica Inc. for USD 1.39 b. Genesse will pay RailAmerica USD 27.50 a share and plans to raise USD 2 b in debt to conduct the funding alongwith USD 800 m of equity. (Bloomberg)

Goldman Sachs – Co. stated in its report that the U.S housing market would make an attractive investment as a strong recovery would ensure a rise in new home sales. The co. raised its rating on the sector from neutral to attractive. Low mortgage rates, rising prices, job market growth and government policies contributed to the rise. (Bloomberg)

Valero Energy Corp – Co. has shut down operations at its oil refinery in Louisiana, U.S following reports of a fire on early Sunday morning. (Reuters)

NRG Energy – Co. is to acquire GenOn Energy in a stock deal worth USD 1.7 b. (Financial Times)

 

 

 

 

EQUITY UPDATE – 18 JULY 2012

ASIA

China’s government announced a railway infrastructure investment of RMB 448.3 b (USD 70.3 b), a 9 percent increase from previous year’s plan of USD 411.3 b. (Bloomberg)

INDIA

Sales of durable goods such as refrigerators, washing machines and flat panel televisions rose in the previous two months after 3 quarters of declining sales. Stable prices, delay in the monsoon and an outcome of rising demand is attributed to the rise in sales. Sales of televisions rose 5 percent in May and 10 percent in June. Air-conditioner sales declined at a slower pace in May and June. The rise in sales is beneficial to co.’s such as Whirlpool, Videocon, Samsung, Voltas and Godrej, amongst others. (Economic Times)

FII’s made a gross purchase of INR 2088.27 cr with gross sales of INR 1613.32 cr, resulting in being net buyers of INR 474.95 cr today. DII’s made gross purchases of INR 777.45 cr vs sales of INR 1043.66 cr, resulting in becoming net sellers of UNR 266.21 cr. (Business Standard)

Reliance Industries – Co. alongwith British Petroleum have warned the government of India that output from the KG-D6 basin would stop by 2015 unless the government approves its capital expenditure plans. Output has declined from 61 mmscmd to below 30 mmscmd. It expects output to decline to below 20 mmscmd levels by 2013. (Business Standard)

Tata Steel – According to co.’s Chairman, co.’s European operations will continue to remain under enormous stress for the next year or two until the Western European economy recovers. (Economic Times)

Trishe Developers – Private Equity firm New Enterprise Associates invested INR 84 cr in the co. which is involved in the renewable wind energy infrastructure co. (Economic Times)

 EUROPE

Germany’s ZEW Investor Confidence Investor Confidence Index declined to -19.6 in July vs -16.9 in June. The index predicts investor sentiment for the coming six months. Expectations came in at -20 on estimates. The index’s sentiment index for the European Union also declined to -22.3 from -20.1 in June. (Bloomberg)

UK’s inflation for June declined to its lowest levels in over 2 years on lower prices of clothes. On a y/y basis, inflation rose 2.4 percent. On an m/m basis, inflation declined 2.8 percent over May. Clothing and footwear prices declined 4.2 percent in June. Lowe prices of fuels, air fares also contributed to the decline. Core inflation declined marginally to 2.1 percent from 2.2 percent in May. (Bloomberg)

Bank of England’s Chief Mervyn King denied allegations that he misunderstood the seriousness of the Libor scandal and that he had a role in the resignation of Barclay’s Chief Bob Diamond. (Reuters)

Royal Dutch Shell – Co. faces a USD 5b fine over its Nigerian Bonga oil spill. (Reuters)

BP – Standard and Poor’s raised its outlook on co. from ‘stable’ to ‘positive’, citing improvement in financial health of the company despite huge Gulf of Mexico spill costs. (Economic Times)

Alcatel – Shares of the co. declined after co. issued a profit warning for FY12. Co. posted an operating loss of EUR 40 m for 2Q12 period. Sales rose to EUR 3.5 b from EUR 3.2 b a q/q basis. Shares declined 15.5 percent to EUR 0.96 a share on the news. (Financial Times)

NORTH AMERICA

Pimco’s Bill Gross stated that the U.S is nearing another recession as asset management firm BlackRock Inc. expects the US Federal Reserve would put in a stimulus package to support growth.  Mixed to lower economic data has prompted Gross to predict the decline. (Bloomberg)

U.S Consumer Price Index came in flat at 0 percent vs expectations of -0.1 percent vs previous period’s data of -0.3 percent. Core CPI on a m/m basis remained unchanged at 0.2 percent. Falling prices of energy contributed to the decline. (CNBC)

Ford Motor India – Co. completed the expansion of its engine production plant which can increase its output by 36 percent to 340,000 engines. The facility also has the capacity to increase production to over 80,000 diesel engines based on rising demand. (Economic Times)

NORTH AMERICAN EARNINGS

Goldman Sachs – Co. reported 2Q12 net earnings at USD 962m; EPS at USD 1.78 vs. expected USD 1.12 vs. previous USD 1.85. Revenue at USD 6.63b vs. estimated USD 6.41b vs. previous USD 7.28b. (IBTimes/CNBC)

Coca –Cola – Co. reported 2Q12 net income at USD 2.79b vs. previous USD 2.80b in 2Q11. EPS at USD 1.21 vs. previous USD 1.22. Excluding items EPS at USD 1.22 vs. estimated USD 1.20. Revenue at USD 13.09b vs. expected USD 12.98b. (CNBC/Reuters)

Johnson and Johnson – Co, reported 2Q12 net earnings at USD 1.41b vs. previous USD 2.78b. EPS at USD 0.50 cents vs. previous USD 1 per share. Sales at USD 16.48b vs. estimated USD 16.69b. Excluding items EPS at USD 1.30 per share vs. estimated USD 1.29 per share. (CNBC)

COMMODITIES

According to Iranian Fars news agency, Iran will take all responsibility for insuring any foreign shipping line and any ship entering Iranian waters. (Reuters)

GOLDMAN SACHS DOWNGRADES THERMAX TO SELL

Thermax – Goldman Sachs downgraded co. to a sell from neutral, with 12 month price target at INR 410. According to Goldman Sachs the co.’s 20 per cent gain over the past one month was unjustified given new order inflows and profitability on the current order book remains challenging. The investment bank also cited low inflows in energy business, lack of potential increase in CAPEX and reduced  pricing presssure also pose a risk to co. (Economic Times/Reuters)

DAILY MARKET REPORT – 05 JULY 2012

Flat trading in the markets seems to be the trend so far this week. Marginal gains sees the Sensex and Nifty in consolidation mode, taking on from global cues with an eye on the interest rate decisions taken by the European Central Bank (ECB). It is expected that the ECB would cut rates today.

The Sensex closed 75.86 points or 0.43% higher at 17538.67 with a high of 17562.89 and a low of 17423.45 in trade today. The Nifty touched highs of 5333.65 and a low of 5288.85 points to close at 5327.30, up 24.75 points.

On the sectoral indices front for BSE, the FMCG Index gained 1.08 percent, Bankex Index advanced 1.0 percent; the Power Index inched up by 0.84 percent;  Metal Index declined 0.57 percent alongwith the Realty Index declining 0.55 percent.

Oil marketing company shares were placed under review by Goldman Sachs today on issues related to diesel price hikes not impacting profits, stability in cash flows.

Barclay’s plc saw a outlook review on the recent happenings in the co. by Moodys.

On the individual stock front, Reliance Industries gained 0.4 percent on hopes of better refining margins in the 2HY12 period. Ashok Leyland gained 2.8 percent on higher capex plans of INR 4,000 cr over the next three years as it would receive tax benefits through a conference call. Maruti Suzuki rose 2.3 percent to touch INR 1250 as its clocked gains of 12 percent this week on higher y/y growth in auto sales at 96,597 units for June 2012 vs 80,298 units sold in June a year ago. Retail stocks rose on a report that the government could permit foreign investors to own majority stakes in domestic retail supermarkets and department stores post the Presidential elections on July 19.

The Rupee touched INR 55.02 levels to the dollar in trade today, gaining 0.46 in trade.

Commodities inched higher during the session with WTI at USD 88.12 up 0.52% and Brent trading at USD 101.88 up 2.11%. On the weather front, strong storms are expected over Detroit, Chicago and Cleveland. Today EIA crude oil inventory are expected to show a draw down of -1.929m from previous draw down of -0.133m.

Kindly check the Market Summary tab for further information on stock-related data.

(Business Standard, Economic Times and Bloomberg)

GOLDMAN SACHS REVIEWS OIL MARKETING CO’S

Indian Oil Marketing Co.’s – Goldman Sachs downgraded co.’s, citing that rises in diesel prices will not have a major impact on profitability. Indian Oil Corp/Hindustan Petroleum Corp reduced to sell from neutral. Bharat Petroleum Corp reduced to neutral from a buy. However Goldman Sachs was positive on oil marketing companies citing stable cash flows and attractive valuation. ONGC retained with  with a buy and Oil India raised to neutral from a sell.

In addition, Goldman Sachs expects the gap between supply and demand to widen further due production decline at KG-D6 blocks, resulting in LNG imports.

Gujarat State Petronet upgraded to buy from neutral on back of attractive valuations and likely positive surprises on transmission tariffs.

Cairn India retained a buy citing high oil leverage and best production growth profile among peers; while Reliance Industries and Essar Oil maintained a buy, on the back of rising refining margins during H2 2012. (Business Standard/Reuters)

EQUITY UPDATE – 29 JUNE 2012

GLOBAL

Dealmaking activity declined by 2 percent in the January – March period for FY2012 on account of the euro debt crisis and volatility in the equity markets. M&A deals worth USD 450 b have taken place in the said period with European dealmaking declining 20 percent. Asia showed a 3 percent rise in activity. (Bloomberg)

ASIA

According to Jia Kang, the director of the China’s Research Institute for Fiscal Science at the Ministry of Finance, a 7.5 per cent growth for the year was attainable. As the Chinese economy could stabilize in the third quarter. (Reuters)

INDIA

According to the Reserve Bank of India (RBI), banking institutions’ borrowings from overseas sources could be affected if the country’s rating suffered a downgrade. Rating cuts of 1-in-3 was forecasted by S&P, while Moody’s and Fitch also have lowered their outlook on the country from stable to negative.  In other news RBI approved FII to invest 23 per cent in commodities exchange without seaking prior approval. (Economic Times)

The Indian Government is to publish a draft regarding the rules of the General anti-avoidance rule (GAAR), according to Finance Secretary R.S Gujral.  The Prime Minister Manmohan Singh is expected to take two or three weeks to interpret the rules of the GAAR policy. (Business Standard)

India looks to export 2 m tonnes of surplus wheat to 17 nations which include Netherlands, Japan and Iraq. (Business Standard)

Coal India – Co. received 2 of NTPC’s de-allocated mines and another in India to commence coal extraction operations. (Business Standard)

PowerGrid Corp – Co. raised a total of around INR 4000 cr in bond issues at a coupon rate of 9.30 percent which is due in 2027. The co. plans to utilize the proceeds of the issue to finance part of its INR 20,000 cr capital expenditure plans. (Economic Times)

Cairn India – Cairn Energy is selling 66m shares in co. at a price range of INR 307.40 to 317.50, according to a source. (Reuters/FirstPost)

Private Equity firm Sequoia Capital made an investment of INR 305 cr in local search engine services provision firm, Just Dial. The investment makes it Sequoia’s third investment in the co. (Economic Times)

Out of the 34 blocks offered to oil co’s under the New Exploration Licensing Policy (NELP), only 13 blocks succeeded in drawing bids worth USD 582.3 m. The offered included eight deepwater blocks, seven shallow water blocks and 19 land exploration blocks. (Economic Times)

Birla Corp – Co. plans to set up an overseas cement, the first of its kind, in Ethiopia. (Economic Times)

NCC – Rare Investments and its related entities have increased their stake in co. by acquiring  750,000 shares (0.3 per cent). Prior to this transaction Rare Investments and entities held 7.69 per cent stake in co. (The Hindu Business Line)

EUROPE

According to the German finance minister Wolfgang Schaeuble, Germany could agree on shared liability of euro-zone debt, if path for a centralized European control was irreversible and well coordinated.  (FoxBusiness/Dow Jones Newswire)

Germany’s think tank IMK said, Germany’s economic growth to slow to 0.3 per cent in 2013 from a 0.6 per cent in 2012, due to austerity measures impacting trade partners. (Economic Times/Reuters)

Italy conducted its bond auctions of EUR 5.4 b for 5 yr and 10 yr bonds. Yields on the 10 yr bonds rose to 6.19 percent vs 6.03 percent in the auction held in May.  The 5 yr bonds yielded at 5.84 percent vs 5.66 percent. The auctions were conducted with investors keeping one eye open on the EU Summit which takes place today. (RIA Novosti)

NORTH AMERICA

US conducted an auction of its 7 year notes at an average yield of 1.075 percent vs median forecasts of yields of 1.056 percent. Bid-to-cover ratio, a gauge of demand, came in at 2.64, the lowest since October 2011. Indirect bidders which include foreign central banks, purchased 42 percent of the notes vs an average of 40.6 percent in the past 10 auctions. (Bloomberg)

Pimco’s Bill Gross stated that it would take decades for the markets and the financial system to return to normalcy after the crisis. He also stated that U.S securities would still be considered the safest instruments in the advent of the ongoing crisis in the markets. (Bloomberg)

JP Morgan – Co. to announce about USD 5b losses related to its derivative trading, during the release of its second quarter earnings, according to people familiar. In other news Citi Research cut co.’s price target to USD 43 from USD 45. (FT/Reuters)

Goldman Sachs – Price target cut by Citi Research to USD 110 from USD 145. (Reuters)

BofA – Price target cut by Citi Research to USD 8 from USD 9. (Reuters)

Morgan Stanley – Price target cut by Citi Research to USD 16 from USD 20. (Reuters)

EQUITY UPDATE – 21 JUNE 2012

ASIA

Renesas Electronics Group – Co., formed by successive mergers between Hitachi Ltd, Mitsubishi Electric and NEC Corp, will receive funding from the shareholders of these firms to boost operations for the firm. With access to loans worth JPY 50 b (USD 633 m), the firm plans to upgrade its plans and cut down on staff strength and downsize around 9 – 10 domestic plants. (Reuters)

INDIA

The Reserve Bank of India to allow non-bank entities with a minimum net worth of INR 100cr to start ATM services. (FirstPost/PTI)

Infrastructure Co.’s – Public sector banks led by IDBI Bank plan to form a consortium to provide lending facilities to infrastructure and construction companies in India. The consortium comprises of IDBI, SBI, Punjab National Bank, Bank of India, Bank of Baroda, Canara Bank, Union Bank, IIFCL and LIC to jointly approve and provide loans of INR 1000 cr and above as part of initiative by the Indian government to provide a push to infrastructure financing. (NDTV Profit)

Reliance Capital Asset Management/Reliance Capital Trustee – Co.’s bought 17.40 Lakh shares in Shopper Stop worth INR 51cr through open market transaction. (Economic Times)

NHPC – Fitch revises outlook to negative from stable. Long term foreign and local currency rating held at ‘BBB-‘. (Money Control)

Hindustan Zinc/BALCO – Government officials to meet today to discuss a possible stale sale in co.’s. (Money Control)

EUROPE

According to ECB’s executive board member Benoît Cœuré , a possible interest rate cut was likely to be discussed at the next month’s ECB rate-setting meeting. Further he backed the use of eurozone’s bailout funds to buy stressed sovereign bonds on the open market. (Financial Times)

A Greek government headed by Antonis Samaras will assume duties in Greece after three parties agreed to form an alliance to run the nation. It will also push for the EUR 174 b bailout plan needed to steer the economy to a certain level of stability. Samaras, the incumbent from the centre-right New Democracy party was sworn in yesterday.  The coalition government is made up of the New Democracy, the PanHellenic Socialist Movement and the Democratic Left splinter group which collectively won 179 seats out of 300. (Financial Times)

Unemployment in UK declined by 51,000 to 2.61 m for period from February – April 2012. Claimant count or the number of people who continue to claim unemployment allowances rose by 8,100 to reach 1.6 m for May vs a decline of 12,800 in April. The claims count exceeded expectations of economists who forecasted a small decline in the data. The labor force grew by 166,000 to 29.28 m on better job creation from the private sector which offset losses in government sector jobs. (Financial Times)

European Insurance Co.s’ – Fitch could cut the co.’s credit rating, in case Greece made a disorderly exit from the euro zone. (Economic Times/Reuters)

Telefonica – Moody’s cut co.’s long term debt rating to Baa2 from Baa1, weaker Spanish consumer base and worsening government credit profile. (Bloomberg/Boston.com/AP)

WPP – Co. agrees to buy AKQA, a digital media firm for USD 540 m. (Financial Times)

NORTH AMERICA

The Federal Reserve will continue to implement its plan, Operation Twist, by purchasing USD 267 b of longer maturity bonds by end of 2012. The move comes on the back of rising borrowing costs and slowdown in the economy. It will sell short the shorter term bonds and purchase longer term bonds to boost liquidity in the markets. It also plans to keep interest rates near zero until 2014. (Reuters)

The US CEO outlook Index dropped to 89.1 in 2Q12 versus 96.9 in 1Q12, largely due to European debt crisis and political gridlocks.

  • In 2Q12 75 per cent expect sales to grow in the next six months versus 81 per cent in 1Q12.
  • In 2Q12 43 per cent would increase capital spending versus 48 per cent in 1Q12.
  • In 2Q12 33 per cent expect to hire more workers, a drop of 6 per cent from previous quarter.

A total of 164 executives were surveyed. (LaTimes/Bloomberg)

Proctor & Gamble – Co. reduced its forecasts for earnings and sales for the second time in three months as its core business and fluctuating currencies continue to suffer. Sales are forecasted to rise between 2 – 4 percent vs previous expected range of  4 – 5 percent. Forex transactions are expected to impact sales by 4 percent on the lower side for the 2012 period. The co. plans to focus on its core markets in 40 businesses and scale back its plans for the emerging markets. Core earnings per share are expected to range between 75 – 79 cents, below previous forecasts of 79 – 85 cents. (Financial Times)

JP Morgan Chase – Co. sold a majority of its position in credit derivatives which caused a USD 2 b loss to the firm. The trade was conducted on Markit’s index called CDX.NA.IG.9 which saw a record USD 31 b of trade with 238 executed trades, helping the co. offload around 70 percent of its position.  The co. plans to minimize its position before a 13 July hearing where it has to provide a detailed account of its trades and loss estimates. (Financial Times)

Tesla Motors Inc – Co.’s six month price target increased to USD 50 from USD 36 by Goldman Sachs. (Boston.com/AP)

COMMODITIES

Production of steel rose 0.7 percent for May 2012 on a global scale to 131 metric tonnes vs 129.6 metric tonnes a year ago. India contributed about 3.9 percent of the total output at 6.2 metric tonnes, up from last years output of 5.96 metric tonnes. Crude steel capacity utilisation ratio declined to 79.6 percent in May 2012 from 81.3 percent in April 2012. (Economic Times)

GLOBAL

G20 leader pledged support for economic growth by strengthening demand and restoring investor confidence. The leaders also vowed to remove cross-border trade barriers. (Economic Times/IANS)