FE: Debt Rejigging: Jain Irrigation wants easier payment terms

3 June 2020: Jain Irrigation has submitted a proposal to lenders asking they restructure Rs 4,000 crore of loans, sources close to development told FE. The rejigging of debt is expected to be such that the company is allowed to repay the loans over a longer period. The plan has been shared with the rating agencies and State Bank of India (SBI) is likely to convene a meeting of lenders soon once the feedback from the agencies is in.

Lenders, who had earlier signed an Inter Creditor Agreement (ICA), are looking to come up with an out-of-court resolution plan for Jain Irrigation since initiating insolvency proceedings under the IBC is not an option.

On Wednesday, the Cabinet decided to suspend insolvency proceedings under IBC following an announcement made by the finance minister in March.

While some lenders had increased provisions, against the exposure, to 15% in the December quarter, when the account slipped to become a non-performing asset (NPA), others are expected to follow suit in the March quarter, in keeping with the income recognition and asset classification (IRAC) norms.

S&P has downgraded Jain Irrigation Systems to ‘D’ (default grade) for missing interest payments due on February 1, 2020. S&P also said the resolution plan might take longer than expected and the company’s operations will continue to suffer due to a lack of sufficient liquidity to manage its debt servicing and working capital requirements. In October, 2019, Care ratings had downgraded Jain Irrigation to ‘D’, due to a delay in servicing its debt.

Source: Financial Express

LM: Moody’s downgrades SBI, HDFC Bank amid bleak outlook for Indian banks

2 June 2020: A day after downgrading the country’s sovereign rating to the lowest level, US-headquartered research and rating agency Moody’s Investor Service, on Tuesday, downgraded both the country’s largest private sector lender HDFC Bank Ltd and the state-owned State Bank of India, citing economic disruption caused by covid-19 outbreak, asset price declines creating severe credit shock across sectors and weakening borrowers’ credit profiles.

Seven other domestic banks saw either their rating or their outlook being negatively revised by Moody’s on Tuesday.

The rating agency announced a rating action on 11 banks. Apart from SBI and HDFC Bank, the nine other banks whose ratings faced an action by Moody’s include Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Export-Import Bank of India (EXIM India), Indian Overseas Bank, IndusInd Bank Ltd., Punjab National Bank and Union Bank of India.

“The rapid and widening spread of the coronavirus outbreak, volatile oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The Indian banking sector has been affected given the disruptions to India’s economic activity from the coronavirus outbreak, which is weakening borrowers’ credit profiles,” said Moody’s.

On Monday, India’s sovereign credit rating was cut by a notch to the lowest investment grade with negative outlook by Moody’s Investors Service, which cited growing risks that Asia’s third-largest economy will face a prolonged period of slower growth amid rising debt and persistent stress in parts of the financial system.

The country’s credit rating was downgraded to Baa3 from Baa2, according to a statement.

On Tuesday, Moody’s said disruptions from the coronavirus outbreak will worsen the economic slowdown in India that has been underway in the past year and will accelerate a deterioration in the banks’ asset quality and profitability.

The rating agency stated that the stimulus measures announced by the Indian government and the RBI will only help mitigate some of the credit pressures.

“The longer and broader the economic slowdown, the more these banks will face asset quality and profitability issues. At the same time, heightened liquidity stress at non-bank financial institutions will pose a risk to the stability of the broad financial system, given banks’ large direct exposures to these entities,” said Moody’s, adding that it expects the standalone credit profiles of most state-run banks to deteriorate.

Also, in the absence of external capital support from the Indian government, Moody’s expects the capitalization of the PSBs to deteriorate.

In Moody’s opinion, the state-run banks’ asset quality and profitability will also deteriorate due to rising loan delinquencies and defaults due to the coronavirus outbreak, which will result in an increase in credit costs.

However, most private sector banks have better loss absorbing capacity than their state-run peers because of stronger capitalization and loan loss reserves.

Moody’s has downgraded the long-term local and foreign currency deposit ratings of HDFC Bank and SBI to Baa3 from Baa2. EXIM’s long-term issuer rating has been downgraded to Baa3 from Baa2.

Moody’s maintains the rating outlooks of the three banks as negative.

Moody’s said the downgrades of HDFC Bank and SBI echo the sovereign rating of India since the rating agency assumes that the two banks will receive government support in times of need.

HDFC Bank reported total assets of Rs.15.3 trillion at 31 March 2020, while State Bank of India had total assets of Rs. 37.5 trillion at 31 December 2019.

“HDFC Bank and SBI’s ratings are unlikely to be upgraded in the next 12-18 months. Nevertheless, the rating outlook could be changed to stable if India’s rating outlook is stabilized,” said Moody’s.

Alongside, Moody’s has placed the “Baa3″ long-term local and foreign currency deposit ratings of Bank of Baroda, BOI, Canara Bank and UBI and their baseline credit assessment rating of “Ba3″ under a review for downgrade.

The review for downgrade reflects Moody’s expectation that the forward-looking improvements to these three bank’s credit profiles will be more difficult in the current environment, said the rating agency.

Bank of Baroda, headquartered in Mumbai, reported total assets of Rs.10.9 trillion at 31 December 2019. Bank of India had total assets of Rs.6.3 trillion, Canara Bank had assets of Rs.7.2 trillion and Central Bank of India reported total assets of Rs.3.5 trillion at 31 December 2019. Mumbai-headquartered Union Bank of India had assets of Rs.5.3 trillion at 31 December 2019.

Private lender IndusInd Bank’s long-term local and foreign currency deposit ratings too have been downgraded to “Ba1″ from Baa3 and its baseline credit assessment rating to ba2 from ba1.

Moody’s has also put its rating outlook as negative for IndusInd Bank.

The bank’s downgrade incorporates the risks to bank’s asset quality and profitability, said Moody’s.

The rating outlook of Punjab National Bank too has been downwardly revised to stable from positive by Moody’s, while the state-run lender’s long-term local and foreign currency deposit ratings at Ba1 has been affirmed.

Only in the case of Central Bank of India and Indian Overseas Bank, the rating agency has affirmed their long-term local and foreign currency deposit ratings at Ba2, while maintaining their rating outlook as stable.

In the case of CBI and IOB, Moody’s expects the asset quality and profitability pressures due to the coronavirus outbreak will be largely mitigated by the improvements in the banks’ credit profile over the past year.

The rating agency has downgraded the counterparty risk rating and counterparty risk assessment of HDFC Bank, PNB, CBI and IOB.

Source: LiveMint

HT: CBI books rice mill, 3 directors in ₹100-cr cheating cases

28 May 2020: The CBI has booked Karnal-based Shakti Basmati Rice Pvt Ltd and its three directors for allegedly cheating the State Bank of India (SBI) to the tune of over Rs 100 crore, officials said on Wednesday.

Directors Shyam Lal, Parveen Kumar and Suresh Kumar allegedly obtained credit facilities from the SBI’s commercial branch in Haryana’s Karnal by misrepresentation of facts, a Central Bureau of Investigation (CBI) spokesperson said.

The company, which manufactured grain mill products (rice), allegedly diverted the loan amount for introduction of share capital, inflated the sale and purchase figures, and devalued stocks to show losses to justify diversion of funds by selling stock out of books, the officials said.

The company allegedly failed to repay the loan amount resulting in the loss of Rs 100.46 crore to the bank. The agency has also booked unnamed public servants in the case, the officials said.

Source: Hindustan 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

ET: Lenders agree to 40% haircut in Digjam resolution

14 February 2020: Lenders have agreed to a resolution plan submitted by Mumbai non banking finance company (NBFC) Finquest Financial Solutions to take over the Kolkata based SK Birla group owned bankrupt textile company Digjam Ltd at a haircut of 40% of total dues. Two banks namely, UCO and State Bank of India will receive a full amount of their admitted claims in a rare instance for banks in the new law, according to a person directly involved in the negotiations.

Digjam, a well-known suiting brand of yesteryears, was dragged to the bankruptcy court by an operational creditor called Oman Inc for claims worth Rs 21.74 lakh in 2018. The Ahmedabad bench of the national company law tribunal (NCLT) admitted the petition in April 2019 following which corporate insolvency resolution process (CIRP) was initiated.

Total dues that Digjam owed its creditors came to about Rs 168 crore. This included bank loans, inter corporate loans and unpaid dues to employees and suppliers. Finquest had offered to pay off Rs 100 crore of the dues including bank loans and other dues beating an offer from another textile company, Donear Industries, one person directly involved in the negotiations said.

“Out of the Rs 100 crore offered by Finquest, Rs 71 crore will be paid to the two banks, Rs 12 crore will go into costs for the CIRP process, employees will get Rs 6 crore and the rest of the money will be given to operational creditors,” this person said.

UCO Bank was the lead lender for the company with loans of Rs 59 crore while SBI had loans outstanding of Rs 12 crore. Both banks voted in favour of the proposal. Mumbai based Finquest which is also in the business of buying distressed debt hopes to start operations of the company which has stopped production for the last 18 months.

“There are 500 employees and workers in the company and their dues have also been taken care of in the process. The plan is to start production and revive the company after we get the final approval from the NCLT,” said this person. Resolution professional Sunil Kumar Agarwal will now approach the NCLT for its approval.

Source: The Economic Times

DNA: Ratnagiri Power on revival path as lenders sign inter-creditor pact

16 August 2019: Ratnagiri Gas and Power Pvt Ltd, which had turned a non-performing asset (NPA) for banks in the fiscal first quarter ended June after Reserve Bank of India (RBI) insisted to downgrade the account, is now on course for a resolution.

Canara Bank, which had taken a dissenting approach from the other lenders and moved the National Company Law Tribunal (NCLT) against the resolution plan of Ratnagiri Gas and Power (RGPPL), has come on board.

All the ten lenders in the consortium have buried their differences and signed the inter-creditor agreement that gives RGPPL, which owns an integrated power generation and regassified liquefied natural gas (LNG) facility, a deep restructuring of its Rs 9,000-crore loan for a repayment cycle of 10 years.

The banks have submitted the resolution plan to RBI and are awaiting approval.

“Canara Bank was the only one which was yet to sign the agreement. As a result, RBI asked all the banks to downgrade the account and classify it as an NPA in the June quarter. Now with all the banks in agreement, we have submitted the proposal to RBI for its final approval. We will abide by whatever the regulator tells us,” said a banker who is involved in the restructuring process.

The Plan

  • Power plant loans will be restructured by the banks
  • LNG business would be demerged into a new company, Konkan LNG Pvt Ltd
  • The demerged entity will be given a loan of Rs 1,500 crore for a breakwater facility
  • The sustainable part of RGPPL’s loan of Rs 9,000 crore would be serviced by the company
  • The unsustainable part will be converted into cumulative redeemable preference shares
  • The sustainable loan will be repaid over a 10-year period at a rate of 10%

The restructuring will involve bifurcating RGPPL’s business into two parts –Power plant whose loans will be restructured by the banks, and demerger of the LNG business into a new company, Konkan LNG Pvt Ltd (KLPL). This demerged entity will be given an additional loan of Rs 1,500 crore for a breakwater facility. In March 2018, National Company Law Appellate Tribunal (NCLAT) had approved the demerger of RGPPL’s LNG business into KLPL.

The debt restructuring will involve dividing RGPPL’s existing loan of Rs 9,000 crore into sustainable, which the company will service, and unsustainable, which will be converted into cumulative redeemable preference shares (CRPS). The sustainable loan will be repaid over a 10-year period with an interest rate of 10%, down from the earlier 13%.

Canara Bank, which had an exposure of Rs 400 crore, had filed two separate cases against RGPPL and KLPL under Section 7 of the Insolvency and Bankruptcy Code (IBC), which had taken the other banks in the consortium by surprise and delayed the resolution plan.

The Dabhol Power company, which is now called RGPPL, was set up in 1992 as a joint venture between Enron as a majority shareholder while GE and Bechtel were minority shareholders. But the construction and operation of the plant were in news for corruption involving political parties, both in India and the US. The central point of the controversy was over the pricing of power, which fixed at Rs 8 per unit was exorbitant compared to the hydroelectricity power, which was at just Rs 0.35 a unit. The power purchase agreement was signed with the Maharashtra State Electricity Board (MSEB). In 1999, the plant began producing energy, but by 2001 MSEB stopped paying for the power and sought to cancel the power purchase agreement. After Enron ran into scandals in the US and finally filed for bankruptcy there, the Dhabhol plant stopped production.

In 2005, it was taken over and revived by converting it into RGPPL, a company owned by the government. The loans and equity were later bought by a consortium of lenders and MSEB, GAIL and NTPC in 2005.

The Konkan-based power plant ran into trouble in 2013 after lower natural gas output from Reliance Industries’ KG D6 basin hit production. Current shareholders of the RGPPL is National Thermal Power Corporation (25.51% stake), GAIL (25.51%) , MSEB (13%), IDBI Bank (12.50%), SBI (10%) and Canara Bank (2.15%).

The DNAIndia reported

FE: NCLAT stays NCLT order to liquidate Adhunik

23 July 2019: The National Company Law Appellate Tribunal (NCLAT) has stayed the order of the Cuttack Bench of the National Company Law Tribunal (NCLT) to liquidate Adhunik Metaliks (AML) after Liberty House Group moved the appellate tribunal against the liquidation order.

Earlier this month, the Cuttack Bench of the NCLT had ordered liquidation of the bankrupt steel maker after cancelling the resolution plan of Sanjeev Gupta-led Liberty House Group, with the UK-based group failing to implement the resolution plan submitted by it for bankrupt AML under the corporate insolvency resolution process (CIRP).

In a stock exchange filing on Monday, AML said, “Liberty House Group preferred appeals before the NCLAT against the liquidation order dated July 9, passed by the adjudicating authority, NCLT Cuttack Bench, in the matter of Adhunik Metaliks.”

In its order dated July 17, the NCLAT said, “Until further orders, operation of the impugned order of liquidation shall remain stayed.”

According to the order, the advocate appearing for State Bank of India (SBI), the lead lender, may file reply affidavit within two weeks. Rejoinder, if any, can be filed within two weeks thereafter. The appellate tribunal has directed to list the matter on August 28. Lenders to Adhunik Metaliks are SBI, PNB, ICICI Bank, IFCI, Punjab & Sind Bank, UCO Bank, Allahabad Bank, BoB, Corporation Bank and Srei Infrastructure Finance, among others.

Earlier, after Liberty House had failed to make the upfront cash payment of Rs 410 crore within the extended timeline to acquire AML, the Committee of Creditors (CoC), led by SBI, had filed an application before the Cuttack Bench of the NCLT to cancel the resolution plan of the LHG stating that it had “committed breach” in implementation of the plan.

In his submission before Justice Madan B Gosavi of the NCLT Cuttack Bench, the counsel for CoC had appealed to revive the CIRP by excluding period vested by LHG by not implementing the resolution plan as the group had not paid the required upfront cash payment to lenders within the stipulated deadline set by the NCLAT. The CoC’s counsel had also requested the Bench to allow them to consider the resolution plan submitted earlier by the H2 bidder, Maharashtra Seamless.

Notably, there had been only two resolution applicants for the debt-ridden steel manufacturing company — Liberty House and Maharashtra Seamless of the DP Jindal Group. LHG had been identified as the highest bidder (H1) by the creditors, while the plan of Maharashtra Seamless had been rejected as it had been offering less value than the liquidation value of the company.

During the hearing by the Cuttack Bench, Liberty House counsel Arvind Kumar Gupta had requested it to give directions to the CoC, the monitoring committee and the managing committee for the corporate debtor to cooperate with them in implementing the resolution plan in proper prospective as per the terms laid down in the plan. The Kolkata Bench of the NCLT had in July last year approved the resolution plan submitted by Liberty House, with lenders agreeing to take a haircut of around 92% and settling for Rs 410 crore against their outstanding dues of Rs 5,370 crore.

The Financial Express reported

ET: Suzlon defaults on bond payment, sources say it’s in talks to sell stake

16 July 2019: India’s debt-laden Suzlon Energy said it defaulted on a $172 million bond payment on Tuesday, as sources aware of the matter said the wind power equipment maker was in talks with several global private equity funds to sell a majority stake.

The company’s creditors, led by India’s biggest lenders State Bank of India, last week signed a so-called inter-creditor agreement (ICA) under which they had agreed not to take the company to a bankruptcy court.

Instead, they are studying a one-time settlement plan offered by the company, said the sources, who asked not to be named as they were not authorised to discuss the matter publicly.

It was not immediately known whether the ICA included the company’s bondholders or not.

The western India-based company said it had not paid $172 million on an outstanding foreign currency convertible bond (FCCB) that was due on Tuesday.

“The company is working on a holistic solution for its debt and continues to be in discussions with various stakeholders in relation to its outstanding debt (including the bonds),” it said in a statement.

The company’s shares fell more than 4% to close at 4.60 rupees on Tuesday, compared with a 0.6% rise in the broader Nifty index.

SBI’s creditors “have sent feelers to all major private equity firms and are talking to some similar sized private equity firms such as Brookfield”, said one of the sources, a Mumbai-based banker.

He said these included a U.S.-based private equity major, but refused to identify the firm.

SBI and Suzlon did not immediately respond to emails seeking comment.

Bloomberg reported last Thursday that Canadian company Brookfield Asset Management Inc. planned an offer for a majority stake in Suzlon and was talking to the firm’s creditors to restructure its outstanding bank loans.

Suzlon, once a shining star in India’s renewable energy space, is struggling with debt of over 110 billion rupees ($1.6 billion).

The company had restructured FCCBs worth $485 million in 2014 at a conversion price of 15.46 rupees a share. Over the course of the last five years most of the FCCBs were converted into equity barring the $172 million tranche.

“Since the company’s share price has been in single digits for over a year now, FCCB holders are not keen to convert their debt into equity,” said the banker.

The Economic Times reported

Zeebiz: Banks under PCA framework to be barred from buying retail assets of NBFCs

12 July 2019: State-run lenders currently under the RBI`s Prompt Corrective Action (PCA) framework on account of bad loans and heavily loss making banks may not be allowed to buy the pooled retail assets of non-banking finance companies (NBFCs) under the scheme announced in the Budget, official sources said, which may leave space for only SBI, Canara Bank, Bank of India, Bank of Baroda to make such purchases.

In the Budget 2019-20, the Centre has allowed a one-time, partial credit guarantee of six months to public sector banks (PSBs) on their first loss of up to 10 per cent for purchase of high-rated pooled NBFC assets of Rs 1 lakh crore. 

This is likely to provide the better-run NBFCs access to liquidity. The partial credit guarantee from the government would help NBFCs raise funds from PSBs, providing them urgently needed funding support . 

They PSBs will be allowed to buy only `AAA` rated retail assets and those a notch below, the sources said. They, however, have their own non-performing assets (NPAs or bad loans) issues and have just started to slowly come out of their bad loan situation but are still not out of the woods. 

While the eligibility norms for PSBs to buy such assets are still to be issued by the Reserve Bank of India (RBI), the Finance Ministry and RBI will ensure that banks currently under lending restrictions under the PCA, or non-PCA banks incurring huge losses and still have an asset-liablity mismatch, will not buy the NBFC retail assets, according to informed sources here.

In a move to help both the NBFCs and PSBs, the RBI had also announced a scheme allowing banks to borrow from the central bank by pledging their excess government bond holdings to fund the purchase of NBFC assets, which can release liquidity of up to Rs 1.34 lakh crore. 

Bank of Baroda reported narrowing its losses down to Rs 991.37 crore in the January-March quarter from Rs 3,102.34 crore in the corresponding quarter last year. Punjab National Bank posted a loss of Rs 4,750 crore for the last quarter of the fiscal ending March 2019. 

The State Bank of India (SBI) posted a net profit of Rs 838 crore in the March quarter against a loss of Rs 7,718 crore in the same period a year earlier. While Central Bank of India`s fourth quarter loss widened to Rs 2,477 crore on high provisioning, the Canara Bank loss in the same quarter narrowed to Rs 551 crore on lower bad loans. 

Bank of India returned in the black after two quarters by posting a profit of Rs 252 crore for the quarter ended March 31, against a loss of Rs 3,969 crore during the same period last year. 

The Modi government recapitalised state-run lenders with Rs 1.6 lakh crore in 2018-19, the highest ever so far. The move helped five banks come out of the PCA framework. 

In her maiden Union Budget presented last week, Finance Minister Nirmala Sitharaman announced a Rs 70,000 crore capital infusion into PSBs in an effort to boost credit. Only five of these — United Bank of India, UCO Bank, Central Bank of India, Indian Overseas Bank and Dena Bank — now remain under the PCA framework.

A year after a series of defaults by Infrastructure Leasing and Financial Services (IL&FS) forced the government to intervene, the problems of India`s NBFCs are entering a new phase, which poses a new challenge for the RBI. 

India`s financial regulator in its latest Financial Stability Report has spelt out its concerns about the implications of the country`s spreading shadow banking crisis, saying any failure among the largest of the NBFCs could cause losses comparable to a collapse among commercial banks.

As reported on Zeebiz

DNA: CBI investigates on what basis banks gave loans to struggling Sterling Group

25 June 2019: The Central Bureau of Investigation (CBI) is investigating officials and examining documents of banks that have lent money to the Sterling Group, which is facing insolvency proceedings over debts of Rs 15,600 crore, Zee Media has reported.

The Banking and Securities Fraud Cell of CBI has been examining documents and questioning officials of the lender banks for eight days. The focus of the CBI’s investigation is to understand on what basis the loans had been sanctioned and if due processes were followed or not.

Many of the banks that lent to the Sterling Group are PSU banks – Andhra Bank, UCO Bank, Union Bank, SBI, Indian Overseas Bank, Allahabad Bank, Bank of Baroda and Bank of India.

The Sterling Group is owned by Nitin Sandesara and his family. The Group owned by Sandesara family, who have fled the country to avoid legal proceedings. Sterling Biotech owes more than Rs 7,500 crore and Sterling SEZ owes over Rs 8,100 crore.

Apart from CBI, Enforcement Directorate is conducting investigation against the Sandesara family. The ED had already moved to the PMLA court and registered a complaint under the recently-enacted Fugitive Economic Offenders Act against Nitin, Chetan and Dipti Sandesara, and Managing Director (MD) Hitesh Patel. Other than Patel, Chetan and Dipti are also MDs of the company.

In March 2019, it was reported that Hitesh Patel was nabbed by the Interpol after a red corner notice (RCN) was issued in his name.

The DNA/Zee News reported