BQ:Lenders Put Up Reliance Naval For Sale Under Insolvency Process

1 June 2020: Lenders of Reliance Naval and Engineering Ltd., part of Anil Ambani’s Reliance Group, have sought expressions of interest from buyers for the sale of the private shipbuilder under the Insolvency and Bankruptcy Code.

The company is currently facing insolvency proceedings at the Ahmedabad bench of the National Company Law Tribunal.

The last date for submission of EoIs is June 27, while final list of prospective resolution applicants will be issued on July 17, according to an offer notice issued by the firm’s resolution professional.

Companies with a minimum net worth of Rs 600 crore and a consolidated group turnover of at least Rs 2,000 crore can bid for the company. The eligibility for financial institutions and private equity investors is Rs 1,000 crore of minimum assets under management.

The last date for submission of resolution plan for Reliance Naval is Aug. 6. The plan is expected to be submitted to NCLT Ahmedabad for approval on Sept. 5, the offer document said.

The company is being sold to recover outstanding loans of Rs 43,587 crore. Of this, the resolution professional has admitted Rs 10,878 crore of dues of financial creditors and another Rs 32,693 crore is under verification.

Operational creditors have claimed another Rs 1,922 crore from Reliance Naval, of which only Rs 485 crore has so far been admitted by the resolution professional, the offer document stated.

Severe Headwinds

Despite having a state-of-the-art facility at Pipavav, Gujarat, Reliance Naval was facing severe headwinds since 2013 due to a lack of orders from the defence ministry. The shipyard has been in a lot of stress leading to a significant reduction in operations as compared to its capacity.

According to an analyst, Reliance Naval’s bankruptcy process will have no impact on its promoter company Reliance Infrastructure Ltd. In its audited accounts for March 2019, the company had provided for its investment in Reliance Naval.

When contacted, a Reliance Naval spokesperson declined to comment.

As per an industry expert, finding a buyer for Reliance Naval will be tough as in the past, two private shipbuilders had failed to attract any buyer under the bankruptcy process.

In the absence of any buyer, ABG shipyard with a total debt of Rs 20,000 crore and Bharti Shipyard with its Rs 13,000 crore debt had to go for liquidation.

This low interest in private shipbuilders is due to lack of orders from the government, the expert said. Lack of orders also forced Larsen & Toubro Ltd. to merge L&T Shipbuilding, including Kattupalli Shipyard, with itself last year.

Source: BloombergQuint

ET: Bankruptcy process at Indu Techzone set aside by NCLAT

29 May 2020: The National Company Law Appellate Tribunal (NCLAT) has set aside the insolvency proceedings at Indu Techzone, providing relief to promoters led by I Syam Prasad Reddy, who is a co-accused in the disproportionate assets case against Andhra Pradesh CM YS Jagan Mohan Reddy.

The tribunal has ordered in favour of the company on the ground that lender IFCI had filed the insolvency petition after missing the deadline as per the Insolvency and Bankruptcy Code.

It allowed Indu Techzone to “function independently through its board of directors with immediate effect”. The May 22 order also provides relief to the Enforcement Directorate, which had attached certain assets of Indu Techzone in the disproportionate assets case and sought to exempt those from the insolvency proceedings.

The firm had approached the NCLAT after the National Company Law Tribunal’s (NCLT’s) Hyderabad bench ordered insolvency proceedings against it in November last year. It argued that the resolution application was barred by limitation — the period within which legal action could be initiated or a right enforced.

The ED had earlier submitted before the NCLT that it had registered a case in August 2011 against Jagan Mohan Reddy and others under the Prevention of Money Laundering Act, wherein Indu Techzone was one of the suspects.

Source: The Economic Times

LM: Jet Airways receives fresh EoIs ahead of the deadline

28 May 2020: The UK-based Kalrock Capital, Hyderabad-based Turbo Aviation, Alpha Airways and Canadian citizen Siva Rasiah are among the 11 investors who have submitted expressions of interest in the beleagured airline Jet Airways. The deadline for submitting EoI was reported to end on Thursday.

The employees consortium and the South American based Synergy Group have also submitted their interest in the company.

This is the fourth attempt by the airline’s resolution professional to find a suitor for reviving the ailing company. Previously, South American conglomerate Synergy Group and New Delhi-based Prudent ARC were given time to submit a resolution plan but failed to meet the deadline.

“While we have received several interests this time, we are yet to confirm who will qualify for the second round,” said a person aware of the matter. “The timing of these bids is interesting as it comes at a time when the airline industry globally is going through the worst crisis. So we need to verify who are the serious players among them,” he added.

Jet Airways was grounded on 18 April 2019 due to acute fund crunch. On 20 June 2019, the Mumbai bench of the National Company Law Tribunal (NCLT) admitted Jet under the Insolvency and Bankruptcy Code after lenders referred it to the bankruptcy tribunal.

The cash-strapped airline, which was grounded in April 2019, owes more than ₹8,000 crore to banks, with public sector lenders led by State Bank of India.

The resolution process for Jet Airways has been extended multiple times since the airline was admitted for insolvency resolution.

Earlier this month, fresh expressions of interest for the airline were invited and the deadline for submission was set for 28 May. The latest deadline for completion of Jet Airways’s insolvency resolution was recently extended to 21 August because of the ongoing lockdown.

In March, the National Company Law Tribunal (NCLT) had allowed 90 days’ extension for the corporate insolvency resolution process of the airline.

Despite its state of affairs, the grounded airline recently offered two of its Boeing 777 wide-body aircraft for evacuation operations of Indians stranded abroad under the Vande Bharat Mission.

Jet Airways could supply up to four aircraft for evacuation missions within a reasonable period of time, Ashish Chhawchharia, who was appointed as the resolution professional to carry out the insolvency process for the airline by lenders, wrote to corporate affairs secretary Injeti Srinivas, Mint reported.

Source: LiveMint

LM: Govt may need to pump ₹1.5 lakh crore into PSU banks

28 May 2020: India may need to inject up to 1.5 trillion rupees ($19.81 billion) into its state-owned lenders as their pile of soured assets is expected to double during the coronavirus pandemic, three government and banking sources told Reuters.

The government initially considered a budget of around 250 billion rupees for bank recapitalisations but that has risen significantly, a senior government source with direct knowledge of the matter said, with loan defaults likely to rise as businesses take a severe hit from nationwide lockdowns to tackle the coronavirus.

“The situation is very grim,” the source said, adding that banks would require fresh funds soon.

All the sources asked not to be identified as the discussions are private. India’s finance ministry did not respond to a request for comment during working hours on Wednesday.

The capital plans were still being discussed and a final decision could be taken in the second half of the fiscal year, a second government source said. India’s fiscal year runs from April 1.

Indian banks were already saddled with 9.35 trillion rupees of non-performing assets at the end of September 2019, or roughly 9.1% of their total assets at the time.

Reuters reported earlier this month that bad loans would likely rise to 18-20% of total assets by the end of the fiscal year next March, as 20-25% of outstanding loans are considered at risk of default.

A nationwide lockdown entering its third month is expected to lead to a contraction in economic growth in the current financial year, according to several global rating agencies, which have also changed their outlook on the banking sector to negative. Economic recovery is likely to take a long time.

One banking source said it was unlikely the federal government would be able to fund the entire capital injection itself and may rely on indirect measures such as issuing bonds as a means of recapitalisation, a method which it has used previously.

“The amount could also be partly funded through monetisation of the fiscal deficit by the central bank,” the first government source said, adding that finance ministry officials were in talks with the Reserve Bank of India (RBI).

The RBI did not respond to a request for comment.

The government has already pumped in 3.5 trillion rupees to shore up state-owned banks in the last five years. India’s federal budget in February for the 2020-21 financial year made no provision for further capital injections, with lenders encouraged to tap capital markets to raise money instead.

Despite a fall in new loans being made because of the crisis, a senior Indian banker said that the government wanted the banking sector to maintain lending growth of at least 6-7% for this financial year to boost the economy, but raising money from capital markets wasn’t easy in the current environment.

“There will be a ripple effect of the slowing economy that banks will feel and we will need capital to sustain and grow,” he said.

Source: Live Mint

MC: NCLT approves IL&FS stake sale in GIFTCL to Gujarat govt

27 May 2020: The National Company Law Tribunal has approved crisis-hit IL&FS to selling its stake in Gujarat International Finance Tec-City Company (GIFTCL) to the Gujarat government. IL&FS has 50 percent stake in GIFTC.

The Gujarat government has agreed to pay a positive equity value of 100 per cent of the IL&FS stake in GIFTCL, by which, the positive equity value of over Rs 32.70 crore will come to IL&FS, according to an NCLT order.

The order said that IL&FS had sought that an amount of Rs 61.84 lakh is excluded as resolution process costs incurred for meeting various expenditures, other applicable taxes from the sale proceeds of the applicant’s shareholding in GIFTCL to the Gujarat government.

The NCLT also permitted IL&FS to withdraw a sum of Rs 3 crore from the escrow account opened to keep sale consideration for meeting the additional process resolution costs that may arise, after approval by the Board of Directors appointed by the tribunal.

“In view of the relief sought by the applicant, this bench hereby approved that sale of shares of GIFTCL held by IL&FS to Governor of State of Gujarat/Gujarat Urban Development Company Limited shall be free and clear from all encumbrances, liens, security interest and third party claims (including any statutory or tax claims) upon receipt of sale consideration from GUDC,” it said.

That sale consideration payable to IL&FS excluding resolution process costs will be credited into a designated Escrow Account intimated by the applicant and such funds will be maintained as interest bearing fixed deposits, the order added.

The National Company Law Appellate Tribunal (NCLAT) had permitted green entities to continue in accordance with the resolution framework subject to the supervision of the Justice (Retd.) D K Jain.

Since GIFTCL has been classified as a “Green” entity, IL&FS commenced the resolution process of GIFTCL.

Source: Money Control

FE: Government proposal: MSMEs may seek own insolvency

27 May 2020: While insolvency proceeding against fresh defaulters are proposed to be suspended for a year to soften the Covid-19 blow, the government is considering a proposal to allow MSMEs to approach the adjudicating authority to declare them insolvent if they so wish to pursue a resolution of their stressed assets.

However, creditors can’t drag MSMEs to the National Company Law Tribunal (NCLT) during this one year. If approved, the move will be part of a special framework under Section 240-A of the Insolvency and Bankruptcy Code (IBC) that the government has proposed to bring in to offer certain flexibilities to MSMEs battered by the pandemic, sources told FE.

Data available with insolvency regulator IBBI show, proceedings in 2,170 cases were going on as of March 2020. Typically most of the insolvent firms are MSMEs, so any relief to such small businesses will benefit a large number of units, say analysts.

While sections 7, 9 and 10 of the IBC would remain suspended for all firms once a proposed Ordinance is implemented, the flexibility enshrined under section 10, which allows corporate debtors to approach the NCLT (typically to avoid coercive action by creditors), could be retained for just MSMEs to give them additional options, one of the sources said.

Another source said the government may consider allowing “pre-packaged” insolvency for MSMEs under the proposed framework. The “prepackaged” bankruptcy scheme typically allows a stressed company to prepare a financial reorganisation plan with the approval of at least two-thirds of its creditors (and shareholders) before the filing of an insolvency application by any party at the NCLT. The resolution plan so reached can then be placed before the NCLT for approval, so that it can be implemented. Such a scheme, already prevalent in countries like  the US, could aid the existing insolvency framework and cut costs and time of the resolution process. The corporate affairs ministry has been exploring the feasibility of implementing the “pre-packaged” scheme in the Indian context for quite some time.

In a huge relief to cash starved firms, the government recently said Covid-19-related debt would be excluded from the definition of default.

Already, in a bid to insulate small businesses from being dragged to the NCLT, the default threshold for triggering insolvency has recently been raised to Rs 1 crore from just Rs 1 lakh earlier.

While larger firms have greater abilities to absorb risks, MSMEs have been most vulnerable to the damaging impact of the pandemic. So, extending flexibility to them at this juncture remains critical.

This will also complement the Centre’s latest measures under the Atmanirbhar Bharat Abhiyan scheme in ensuring that MSMEs get adequate credit to resume operations. For instance, MSMEs will be eligible for the recent package, including additional, collateral-free working capital loan (up to 20%) with a cap of Rs 3 lakh crore (with official guarantee), subordinate debt of Rs 20,000 crore and Rs 50,000-crore fund of funds to bolster the equity base of MSMEs that have growth potential and need some hand holding. Just the collateral-free loan move is expected to help 45 lakh units, the government has said.

Source: Financial Express

ET: NCLT clears decks for Tatas’ acquisition of Bhushan Steel

16 May 2020: The National Company Law Tribunal (NCLT) on Tuesday approved Tata Steel’s bid for Bhushan Steel Limited (BSL), clearing the deck for the bankrupt mill’s acquisition by India’s oldest maker of the primary infrastructure alloy.

The NCLT also dismissed a plea filed by the employees of Bhushan Steel opposing Tata Steel’s bid. It also rejected another petition by engineering and construction major L&T, an operational creditor to Bhushan Steel: L&T had sought priority in repayment of debt in the resolution process.

In a late evening statement Tata Steel said as per the terms of approved Resolution Plan, Bamnipal Steel Limited (`BNPL’), a wholly-owned subsidiary of Tata Steel, will initially subscribe to 72.65% equity share capital of BSL at face value i.e. at Rs 2 per share, for an aggregate amount of Rs.158.89 crore.

“The financial creditors shall receive a total consideration of Rs 35,200 crores for the settlement of the existing financial debt of BSL,” Tata Steel said. It will be funded through a combination of equity and inter-corporate loans, of which upto Rs 9,000 crore loans have an option of conversion into equity shares of BSL. The Resolution Plan also requires financial creditors to invoke pledge on existing equity shares of BSL.

“As per the approved Resolution Plan, BNPL shall be classified as the ‘promoter’ of BSL, and the existing promoters shall be de-classified as ‘promoters’ of BSL for the purposes of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,” the statement added. The NCLT nod will be a shot in the arm for Tata Steel which has been allegedly facing challenges on the ground in its efforts to assert control over BSL’s main plant at Dhenkanal in Odisha.

On March 23, Tata Steel said it had accepted the letter of intent for Bhushan Steel under the corporate insolvency resolution process of the IBC after the Committee of Creditors (CoC) for BSL accepted its bid. Earlier, it had emerged as the highest bidder for Bhushan Steel with a Rs 35,200-crore offer, paving the way for the acquisition of a five million tonne plant in Odisha with a product basket catering to high-value auto and consumer durable makers.

In the race for BSL, Tata Steel had edged past JSW Steel and a private equity backed group of 400-odd Bhushan Steel employees. On March 7, Tata Steel said it had received a formal communication from the resolution professional of Bhushan Steel that it had been identified as the highest evaluated compliant resolution applicant to acquire a controlling stake in Bhushan Steel.

Following NCLT approval the only other nod that is awaited is from the Competition Commission of India (CCI). Bhushan Steel owes nearly Rs 56,000 crore to its lenders.

Acquisition of BSL will be a key element in Tata Steel’s domestic growth strategy under new Tata Sons chairman N Chandrasekaran. With Tata Steel tipped to enter into a joint venture with ThyssenKrupp of Germany for its European steel business, the focus is clearly back on growth in India.

Tata Steel’s domestic steel capacity, now at 13 million tonnes, is poised to be augmented by 5.6 million tonnes with the Bhushan Steel acquisition. Bhushan Steel makes flat products like hot- and cold-rolled coil (HR/CR coils) and galvanised sheets.

The resolution process for BSL, which was referred to NCLT in July 2017, has had its share of challenges. At the end of January, BSL promoter and vice chairman Neeraj Singhal had sought to halt the process by writing to lenders and asking them to consider restructuring the company’s debt under the sustainable structuring of stressed assets (S4A) mechanism by dividing the debt into sustainable and unsustainable parts, with no haircut.

Source: The Economic Times

FE:Orchid Pharma resolution: Banks will be able to show recovery in Q4

2 April 2020: Lenders to Orchid Pharma have received close to Rs 1,100 crore from Gurgaon-based Dhanuka Laboratories on the last working day of the financial year 2020, sources close to development told FE. The monitoring committee attached to the insolvency process of Orchid Pharma implemented the resolution plan on March 31.

This implies around 32% recovery for banks against total exposure of Rs 3,299 crore to Orchid Pharma. The development on late evening of March 31 also marks significance as banks will be able to show recovery on their books in the March quarter.

According to sources, lead creditor State Bank of India (SBI) has in all likelyhood received Rs 130 crore, Bank of India Rs 101 crore, Allahabad Bank Rs 81 crore, Andhra Bank Rs 74 crore, Punjab National Bank (PNB) Rs 70 crore and Union Bank of India Rs 62 crore from the resolution of Orchid Pharma.

The lenders will also receive 4,08,164 equity shares of Orchid Pharma at Rs 10 each. There will also be issue of 0% non-convertible, non-marketable, cumulative redeemable debentures of value of Rs 3,650 crore to a special purpose vehicle created by Dhanuka Laboratories, as a part of the resolution plan.

The National Company Law Tribunal (NCLT), Chennai, had approved Dhanuka’s resolution plan on June 25, 2019, for Orchid Pharma after earlier approved bidder — Ingen Capital — refused to pay money for the company. However, trouble started for the company when the National Company Law Appellate Tribunal (NCLAT) in its November 13, 2019, judgement had set aside the Chennai NCLT’s order that approved the resolution plan by Dhanuka, on the ground that the amount offered in favour of stakeholders including the financial creditors and the operational creditors, was less than the liquidation value.

Lead creditor SBI had later filed the appeal before the Supreme Court seeking setting aside the NCLAT order, alleging that the appellate tribunal erred in overriding the commercial wisdom of the CoC.

Finally, a Supreme Court bench of Justices Rohinton Fali Nariman and S Ravindra Bhat, on February 28, 2020, set aside the judgement of the NCLAT, in view of its recent judgement where it had categorically held that no provision in the Insolvency and Bankruptcy Code (IBC) or regulations had been brought to the court’s notice, under which the bid of any resolution applicant has to match the liquidation value arrived at in the manner provided in the relevant regulations.

The Financial Express reported

BS: Rs 750 cr paid by JAL was towards obligation of Jaypee Infratech: NCLT

6 March 2020: The NCLT Delhi bench on Tuesday approved the bid of state-owned NBCC to acquire debt-laden JIL through an insolvency process and complete around 20,000 pending flats over the next three and half years

The Rs 750-crore deposited by Jaypee Infratech’s (JIL) parent firm Jaiprakash Associates with the Supreme Court registry was a payment towards obligation of the debt-ridden firm and should be treated as the asset of the corporate debtor, the NCLT has observed while approving the bid of NBCC for JIL.

The NCLT Delhi bench on Tuesday approved the bid of state-owned NBCC to acquire debt-laden JIL through an insolvency process and complete around 20,000 pending flats over the next three and half years.

The court also ordered that the Rs 750 crore deposited by Jaypee Infratech’s parent firm Jaiprakash Associates Ltd (JAL) with the registry of the Supreme Court would be part of the resolution plan.

In the written order uploaded on its website on Thursday, the NCLT said that as JAL is not under further obligation to complete construction of homes, and it cannot be assumed that if this money returned then it would be utilised to settle the debt of creditors of Jaypee Infratech Ltd (JIL).

“Since JAL is not under further obligation to complete construction of homes, there is no occasion to assume that if this money go back to JAL, it would be utilised for the cause of the creditors of the corporate debtor, in view of thereof, we hereby dispose all CAs related to Rs 750 crore issue by holding that this money is to be treated as the asset of the corporate debtor,” the NCLT order said.

“Though it has not been explicitly explained that JAL paid on behalf of JIL, the matter pending before the Supreme Court being with regard to homebuyers of JIL, when money was asked to be deposited towards refund of JIL homebuyers and the same being paid by JAL, now it is not open to JAL to say that it is JAL’s money,” it said.

NCLT also rejected the submissions that Rs 750 crore has not gone into the books of JIL, therefore it cannot be treated as the assets of JIL.

“Since JAL has without any objection or condition paid to the home buyers of JIL on behalf of JIL, it has to be treated that the payments is towards the obligation of JIL,” said NCLT in its 115-page-long order.

According to NCLT, In this case, the homebuyer’s money has been lying with the corporate debtor and JAL, it is the admitted fact that money come from the homebuyers has gone to JAL in the name of construction.

“It is not the case of the JAL that JIL money has not come for construction. Moreover JAL, by the time it has desposited, was aware that it was depoisting that money towards the obligation owned to JIL homebuyers,” the order saod.

“Here there could not be any assumption or presumption to say that JAL depoisted this money before the Supreme Court with an assumption that it would come back to it in the event this money has not been utilised for the distribution of it to the homebuyers of JIL,” it said.

“As long as the Supreme Court has not stated that this money has to be returned to JAL, it has to be construed that Supreme Court has conciously retained the money within the custody of it and thereafter transferred this money to NCLT with a direction that the parties shall abide by the directions of NCLT,” said NCLT adding ” Had the Supreme Court has felt that it should go back to JAL, the Supreme Court would have returned it to JAL, but but has not been done.”

NCLT further said: “Whenever any payment is made towards any liability, it has to be treated as a payment made towards that liability. It does not matter who paid the money, it matters as whether it has been paid towards an obligation or not.”

Jaypee Infratech went into insolvency process in August 2017 after the NCLT admitted an application by an IDBI Bank-led consortium.

NBCC’s proposal was approved by the lenders in the third round of bidding process to find a buyer for Jaypee Infratech.

In its bid, NBCC had proposed to complete over 20,000 pending flats in housing projects launched by Jaypee Infratech in Noida and Greater Noida (Uttar Pradesh).

Homebuyers’ claim amounting to Rs 13,364 crore and lenders’ claim worth Rs 9,783 crore were admitted.

NBCC offered 1,526 acres of land to lenders under a land-debt swap deal.

Source : Business Standard

FE: Jet Airways creditors file claims worth Rs 30,907 crore

20 September 2019: The total claims filed by creditors against Jet Airways has been updated to Rs 30,907 crore. As on September 6, the resolution professional (RP) of the grounded airline has admitted claims worth Rs 14,054 crore. The RP is yet to verify claims worth Rs 3,202 crore. An earlier notification on claims against Jet Airways showed that total claims stood at Rs 30,588 crore as on August 7. Financial creditors, including domestic and foreign banks, have dues worth over Rs 8,200 crore with Jet Airways.

The total claims amount has risen even as the Synergy Group, the sole suitor for the beleaguered Jet Airways, met with lenders of the airline earlier this week seeking a haircut on its existing debt.

On June 24, the RP had invited operational and financial creditors to file claims against the airline. Claims worth Rs 13,670 crore have so far been rejected, according to data on the airline’s website.

Jet Airways has been grounded for five months. It halted operations on April 17, after lenders refused to provide emergency funding to the airline. Slots belonging to Jet Airways have since been reallocated to other airlines. Following the grounding of Jet Airways, lenders of the airline, led by the State Bank of India, tried in vain to sell the airline.

On June 20, the National Company Law Tribunal (NCLT) initiated insolvency proceedings against the airline. According to the timeline set out by the RP, the resolution plan for Jet Airways is expected to be finalised for the NCLT’s approval by October 27.

The Financial Express reported