TOI: Moody’s downgrades India’s rating to ‘Baa3

1 June 2020: Moody’s Investors Service on Monday downgraded India’s sovereign rating to ‘Baa3’ from ‘Baa2’, saying there will be challenges in implementation of policies to mitigate risks of a sustained period of low growth and deteriorating fiscal position.

“Moody’s has today downgraded the government of India’s foreign currency and local-currency long-term issuer ratings to Baa3 from Baa2. It has also downgraded India’s local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2. The outlook remains negative,” the agency said in a statement.

The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength than Moody’s currently projects, it added.

“The decision to downgrade India’s ratings reflects Moody’s view that the country’s policy-making institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,” the statement said.

 ‘Baa3’ is the lowest investment grade – just a notch above junk status.

Moody’s had in November 2017, after a gap of 13 years, upgraded India’s sovereign credit rating by a notch to Baa2 from Baa3.

Source: The Times of India

TOI: Banks may seek exit of Naresh Goyal, nominees from Jet board

21 March 2019: Lenders to cashstrapped Jet Airways are looking at a change of management as part of a revival plan as the promoters, led by founder and chairman Naresh Goyal, have refused to cooperate and bring money into the company. 

“He wants to retain control without bringing any money,” said a source familiar with the discussions. Goyal’s departure from what was once India’s largest airline was a key stumbling block in talks with the Tata Group as well. Apart from Goyal, his wife Anita, and Gaurang Shetty, who joined in 1996, represent the promoters on the board of directors. Although lenders have not disclosed the plan post the exit of Goyal and his nominees, they are keen to rope in other investors and would prefer domestic players, government sources indicated. Lenders led by SBI had asked the promoters, who own 51% shareholding, to bring Rs 750 crore. 

Sufficient room to revive Jet Airways: SBI chairman

They would have then released a matching amount to keep the airline afloat. But instead of infusing funds, Goyal, who started out as a travel agent, lobbed the ball in Etihad’s court. Etihad has refused to invest any more money in the airline. “We are not concerned with who the promoter is. Our aim is that Jet Airways should not be harmed. There are Rs 4,000 crore worth of creditors and nobody wants to take Jet Airways to IBC (Insolvency and Bankruptcy Code),” said a banking source.

SBI chairman Rajnish Kumar told reporters on Wednesday after meeting finance minister Arun Jaitley that lenders were almost ready with the resolution plan but will need a little more time “because of certain issues”. While he did not elaborate on the reasons, another banker said that Etihad’s refusal to be part of the deal has resulted in further complications. 

“Discussion with Etihad is on. Etihad will take a decision based on its assessment of the situation. It is not that they have decided that they will go out. However, they have certain conditions that the airline should be run in a professional manner,” the SBI chief said. Kumar, however, said that there was sufficient room to revive the private carrier. “

“We have not reached that point where we can say enough is enough and nothing else can be done… Every effort is being made by the lenders to keep the airline running. It is in everybody interest that Jet Airways continues flying,” he said. He clarified that the government has not given the lenders any directions and the decisions will be taken in commercial interest.

The Times of India reported

LM: Jet Airways crisis worsens as govt steps in, pilots threaten strike

19 March 2019: A crisis at Jet Airways (India) Ltd deepened on Tuesday as an increasingly worried government called for an emergency meeting, angry passengers demanded refunds and pilots threatened to go on strike over unpaid salaries.

Civil aviation minister Suresh Prabhu asked his officials to call for a meeting to discuss grounding of flights, advance bookings, cancellations, refunds, and any potential safety issues, at the cash-strapped carrier.

Saddled with debt of more than $1 billion, Jet Airways is struggling to stay aloft. It has delayed payments to banks, suppliers, pilots and lessors—some of whom have started cancelling their lease deals with the airlines.

The groundings have forced Jet Airways to cancel hundreds of flights, some at the last minute, leaving passengers stranded. Many have taken to social media to voice their angst.

Jet Airways is currently operating only 41 aircraft, just a third of its original fleet, the aviation regulator, the Directorate General of Civil Aviation (DGCA), said in a statement, adding that the situation is fluid and the airline may be forced to reduce its fleet further in coming weeks.

Several angry passengers were seen demanding pending refunds for cancelled flights at Jet Airways’ offices in Mumbai earlier on Tuesday, a source told Reuters.

The airline’s pilots union has also said that pilots have decided to stop flying from 1 April if Jet Airways does not have a rescue plan in place by 31 March and does not provide a proper roadmap on paying their overdue salaries.

“It is not about the salary right now, it is about whether we are going to survive,” one pilots told television news channel ET Now.

Jet Airways did not immediately respond to a request for comment.

The 25-year-old airline is in talks with its lenders—state-run banks led by State Bank of India (SBI)—and its biggest shareholder, Abu Dhabi-based carrier Etihad Airways PJSC, to secure a rescue deal but talks have dragged on and it is struggling to finalise a plan.

While on the surface Jet Airways’ future still hangs in the balance, there has been behind-the-scenes support from the government indicating that a bailout is likely, Reuters reported earlier on Tuesday.

The government has asked state-run banks to rescue the privately held airline without pushing it into bankruptcy, as Prime Minister Narendra Modi seeks to avert thousands of job losses weeks before a general election, people familiar with the matter have said.

DGCA said that with the current fleet, Jet Airways is likely to operate only about 985 flights a week or 140 flights a day—down from an average of about 650 flights a day in March 2018.

The regulator also said that Jet Airways’ pilots, cabin crew and ground staff who have reported any kind of stress should not be put on duty, and the airline should carry out regular maintenance of its aircraft even if they are currently grounded.

Prabhu, in a separate statement on Tuesday, asked officials to continuously monitor the situation at Jet Airways and ensure that public interest and safety are given top priority.

The Live Mint reported

MC: It may be JSW Steel vs ArcelorMittal for Asian Colour Coated Ispat

8 March 2019: Sajjan Jindal’s JSW Steel may square up with LN Mittal’s ArcelorMittal in the race for Asian Colour Coated Ispat, which was referred to the insolvency courts.

Sources told Moneycontrol that both companies will be submitting bids on March 8, the last day. Apart from the two, a host of funds too may also participate.

The contenders had submitted Express of Interest (EoI) in November last year. Asia Colour Coated has a debt of over Rs 4,000 crore. “The bids are expected to be in the region of Rs 1,200 crore,” said a senior industry executive.

Spokesperson of both the companies declined to comment.

This will be the third time that the two steelmakers will be facing each other. Both were in contention for the Italian steelmaker Ilva, and in India, Jindal had backed the Ruias in their bid to wrest back Essar Steel.

ArcelorMittal was selected as the preferred bidder by Essar Steel’s bankers, late last year. The Ahmedabad bench of National Company Law Tribunal (NCLT) is scheduled to give its order on ArcelorMittal’s bid later on March 8.

Asian Colour Coated Ispat has manufacturing facilities close to Delhi and Mumbai, and specialises in downstream, galvanised and colour coated products that it exports to Europe, Latin America and Africa. It has an annual capacity of one million tonne.

The downstream facility will benefit both JSW Steel and ArcelorMittal.

The Jindal company has been eyeing downstream assets as it looks to increase the proportion of high-value products in its portfolio.

“Today what is left (in the insolvency courts) are companies that either of smaller size or downstream. So, we are particularly evaluating downstream side more intensely than the integrated side,” JSW Steel Joint Managing Director and Group CFO Seshagiri Rao said in an earlier interview.

ArcelorMittal, which is favourite to bag Essar Steel, has been looking at facilities in other parts of the country that will complement its operations.

Talking about its India aspirations, the company had stated in its recently released 2018 Annual Report: “There is also a long-term aspiration to increase finished steel shipments to between 12 MT and 15 MT through the addition of new iron and steel making assets, so that ESIL (Essar Steel) can play an active role and fully benefit from the anticipated growth in the Indian steel industry.”

Moneycontrol reported

ET: NCLAT allows withdrawal of Liberty House bid for ARGL

8 March 2019: The National Company Law Appellate Tribunal (NCLAT) on Friday allowed the withdrawal of UK-based Liberty House bid for ARGL on the plea of resolution professional of the debt-ridden company.

A two-member bench, headed by Justice S J Mukhopadhaya, also pulled Liberty House for not pursuing the corporate insolvency resolution process after being selected as the highest bidder.

“You are a failure party all the time, dragging your feet. You are in bad reputation. We would not allow you to take advantage of the appellate tribunal,” the bench said.

NCLAT has upheld the previous order of the Chandigarh bench of NCLT, which had imposed a cost of Rs 1 lakh on Liberty House citing casual approach.

The appellate tribunal also directed to deduct the time period between December 14, 2018, and Friday from the resolution process.

Under the Insolvency and Bankruptcy Code, a resolution process has to be completed under 180 days with a further extension of 90 days to 270 days.

Meanwhile, NCLAT also said that its order would not debate Liberty House in participating in other resolution processes.

“Any observations against Liberty should not construed as finding against them ineligible from participating in any other resolution process,” NCLAT said.

Liberty House had emerged as the highest bidder in ARGL, a subsidiary of debt-ridden auto components maker Amtek Auto.

However, the company refused to go ahead and submit a bank guarantee after emerging as the highest bidder.

Following which, the resolution professional of the company moved NCLT to cancel the bid. NCLT had allowed it and imposed a cost on Liberty House.

This was challenged by Liberty House before NCLAT.

The Economic Times reported

BS: RBI circular has one-size-fits-all approach, power firms tell SC

6 March 2019: The Reserve Bank of India’s (RBI’s) February 12, 2018 circular asking banks to move insolvency petitions against large non-performing assets (NPAs) that have not been resolved, is based on a ‘one-size-fits-all’ approach without taking into consideration factors such as the reasons for non-payment, power companies told the Supreme Court on Wednesday.

There is no distinction between the kinds of debtors, the reasons for non-payment of the debt or consideration for external factors influencing the sector, senior advocate Abhishek Manu Singhvi, appearing for one of the power companies told the court. 

The discretionary power of banks to decide whether an account would turn non-performing asset (NPA) or not had also been taken away by the RBI owing to the circular, he said.

A two-judge Bench of Justice Rohinton Fali Nariman and Justice Vineet Saran is hearing a bunch of petitions moved by power, sugar, and shipping companies challenging the RBI’s circular. 
On February 12 last year, the RBI had asked banks and other lenders to either execute a resolution plan for big stressed accounts or file insolvency petitions against them in the National Company Law Tribunal (NCLT).  

Citing that in their case, the supply side as well as the demand side was under the watchful eyes of regulators, the power companies on Wednesday said that the sector should have been exempted from the RBI’s diktat.

“On the supply side, there is a shortage of coal. How do I get coal? And if I get coal, whether I will get linkages or not is another question. On the demand side, I cannot increase my tariff. Even if I approach the regulator to seek permission to do the same, it would take at least 2-3 years,” the counsel appearing for one of the power companies told the court.

Even within the power sector, there was a huge difference between the condition of public and private companies as the dues of the latter was not cleared on time by states and power distribution companies (discom) on time, he said.

The apex court is scheduled to resume hearing the companies on Thursday. It is hearing these petitions by dividing them into three categories. There are some companies that have challenged the validity of the Insolvency and Bankruptcy Code. The second group of companies have challenged the constitutional validity of the circular, and the third group, which consists mostly of power companies, have sought temporary relief from the circular only for themselves.

The Business Standard reported

ET: Operational creditors with over Rs 1 cr dues from Essar Steel appeal to ArcelorMittal for payment

6 March 2019: A forum of operational creditors with over Rs 1 crore in admitted dues from Essar Steel has appealed to ArcelorMittal which is in the process of acquiring the debt-ridden company, to pay their dues as well.

Last October, a committee of Essar Steel creditors had picked ArcelorMittal to acquire the 10-million tonne steel mill for over Rs 42,000 crore. But the original promoters, the Ruias made a counter bid with Rs 54,384 crore offer later and was rejected by the lenders and the resolution professional.

The NCLT Ahmedabad has been directed by NCALT to conclude the process by March 8.

ArcelorMittal’s resolution proposal also includes an additional Rs 8,000-crore of capital injection into the company to improve operational efficiencies, increase production and deliver enhanced levels of profitability.

In its appeal, a forum of operational creditors with over Rs 1 crore of dues, said it is unfair that ArcelorMittal is not paying a penny to such creditors.

Essar Steel’s operational creditors with large dues include the national oil marketer IndianOil with over Rs 3,500 crore of dues.

“Our appeal is that ArcelorMittal may graciously and voluntarily modify their offer a bit and pay us also if not in one go at least in installments, over the next 12 months,” the forum said.

Noting that the buyer is paying in full those operational creditors with less than Rs 1 crore dues, the forum said “it’s extremely discriminating and wholly arbitrary. The operational creditors with over Rs 1 crore dues are being singled out as if they are being punished. What crime have we committed?”

Late last month, the National Company Law Appellate Tribunal (NCLAT) had directed the NCLT Ahmedabad to take a decision by March 8 on the Rs 42,000-crore bid submitted by ArcelorMittal for the acquisition of Essar Steel.

The resolution process is nearing 600 days instead of the mandated 270 days.

Essar Steel runs a 10-million-tonne steel mill at Hazira in Gujarat and owes over Rs 49,000 crore to over two dozen banks led by the SBI and has been under the bankruptcy proceedings since June 2017.

The Economic Times reported

BS/BTVI: Hotel Leelaventure hits 10% upper circuit on reports that RIL may buy stake

6 March 2019: Shares of Hotel Leela Venture hit the  upper circuit of 10 per cent at Rs 12.24 apiece on the BSE on Wednesday, after the company said it is evaluating various options for investment in the company or for sale of company’s assets. According to news channel BTVI, Reliance Industries (RIL) is eyeing Hotel Leela Venture.

“The company, in consultation with the lenders, is evaluating various options and there is no binding contract with any investor as on date either for investment in the company or for sale of company’s assets,” Hotel Leela Venture said today in a regulatory filing on clarification in news report. (READ THE CLARIFICATION HERE)

JM Financial Asset Reconstruction Company Limited (JMARC) has filed an application with National Company Law Tribunal (NCLT) against Hotel Leela Venture, under section 7 of the Insolvency and Bankruptcy Code, 2016.

Hotel Leela Venture last week said that the company is continuing to engage with prospective investors for a resolution. 

Reliance Industrial Investments and Holdings Limited, a wholly-owned subsidiary of RIL, holds 18.53 per cent stake in EIH, which operates Oberoi and Trident Hotel brands.

Hotel Leela Venture has rallied 27 per cent in the past three trading sessions from Rs 9.67 on Thursday, February 28, 2019. In comparison, the S&P BSE Sensex has moved up 2 per cent during the period. A combined 808,000 equity shares changed hands on the NSE and BSE.There were pending buy orders for 894,000 shares on both the exchanges. On the other hand, RIL was up 2.4 per cent at Rs 1,267, the top gainer among the benchmark S&P BSE Sensex in intra-day trade.

The Business Standard/ BTVI reported

NIE: ABG Shipyard headed for liquidation as Liberty house gives up bid

6 March 2019:  The ABG Shipyard is likely to head for liquidation as Liberty house has given up on the bid for it.

“The Liberty house finally given up on the bid. The Committee of creditors (CoC) has already rejected its bid after it defaulted on the Amtek Auto,” a source familiar with the proceedings told this publication.

ABG Shipyard, the debt-laden shipbuilder, is among the first list of 12 companies that the Reserve Bank of India has directed banks to refer to the bankruptcy court immediately.

The consortium of about two dozen banks, led by ICICI Bank, has mandated SBI Caps for finding the buyer for their 51 per cent equity in ABG Shipyard.

After the bids were floated, London-based metals house Liberty House emerged as the sole bidder of ABG Shipyard, which is facing Rs 18,245 crore claims from financial creditors.

Liberty House offered Rs 5,600 crore for the bid, which would be payable only after the fifth year, with a rider that there would be no interest payment in the interim period. However, the bankers already had rejected the offer.

“Even before Liberty House became the sole bidder, it had already defaulted on payment in case of Amtek Auto. So, the CoC was not in favour of Liberty House and that means that the company would go for liquidation,” the source added.

Order on ABG Shipyard is reserved by the National Company Law Tribunal, Ahmedabad.

The New Indian Express reported

BS: Real estate firms move SC against ‘financial creditor’ tag for homebuyers

6 March 2019: Real estate companies such as Wave Group’s Wave Megacity Centre, among others, are said to have approached the Supreme Court challenging the government’s decision to grant homebuyers the status of financial creditors.

In their petition before the top court, these real estate companies have claimed that granting financial creditor status to all homebuyers and real estate allottees will complicate the situation as they will now have to accommodate all such people to the committee of creditors.

“These companies have been fighting battles on many fronts. Adding homebuyers to the mix has only added confusion. In fact, if they are not part of the legal process, the chances of them getting at least their money back is much more,” said a source close to a company against which insolvency proceedings are on.

The Parliament had, on August 11 last year, passed a Bill to amend the Insolvency and Bankruptcy Code 2016, allowing homebuyers to be treated as financial creditors.

The petition by real estate companies comes nearly a month after the top court had stayed further proceedings against Ansal Housing in a similar case. Hearing the petition moved by Ansal Housing challenging the government’s decision, a two-judge Bench of Justices Rohinton Fali Nariman and Vineet Saran had issued notice to the central government and stayed further proceedings against the company. The case is likely to be heard next on March 25.
“Even in the case of justifiable delay, the petitioner will be faced with no alternative but to refund amounts as demanded by such allottees that approach the National Company Law Tribunal (NCLT). This, in turn, would have a cascading effect and significantly hamper construction work of all ongoing projects being developed,” Wave Megacity Centre has said in its petition.