Global investment bank Goldman Sachs has teamed up with alternative investment firm Värde Partners to take over RattanIndia Power Ltd’s debt from the company’s lenders for Rs 4,050 crore ($568 million).
Goldman and Värde Partners, through Aditya Birla ARC Ltd, are buying the debt from 12 lenders led by state-run Power Finance Corporation and State Bank of India, RattanIndia Power said in a statement.
The power producer, led by chairman Rajiv Rattan, owed these existing lenders a principal amount of about Rs 6,574 crore. This means the lenders are taking a haircut of about 38% on the principal debt.
RattanIndia Power also said that this is the biggest debt resolution deal by international stressed asset funds in India and one of the biggest outside the insolvency resolution framework without any change in management.
This is also the first transaction to close under the Reserve Bank of India’s revised framework for stressed asset resolution announced in June.
“This deal will provide a template for more such foreign investments in debt in stressed assets in the infrastructure sector,” said Aman Singh, CEO at Rattanindia Power.
The new deal comes after Aditya Birla ARC and Värde Partners agreed in February 2019 to acquire part of the Rs 8,075 crore debt that RattanIndia Power owed its lenders for a 1,350-megawatt plant in Amravati, Maharashtra.
Previously, state-run PFC had initiated insolvency proceedings against RattanIndia Power in September 2018 under the RBI's February 2018 rules. In May this year, RattanIndia Power said that the cases filed were withdrawn after the Supreme Court quashed the RBI’s February 2018 framework. The central bank released new rules in June.
The company claimed that most deals in the power sector, resolved under the insolvency framework in the past, had been settled at Rs 1.2-1.5 crore per megawatt. However, this transaction closed at Rs 3 crore per MW.
KPMG was the exclusive financial adviser to the transaction. Khaitan & Co advised on all legal matters.
The debt resolution comes in the backdrop of significant challenges that the Indian power sector has been undergoing in terms of dealing with stressed assets. According to a parliamentary report, as much as 65,000 MW—or 72%—of the total installed thermal power capacity put up by private companies could be financially stressed.
In financial terms, banks and financial institutions have lent Rs 5.6 trillion in gross advances to private coal-based power companies. Nearly a fifth of this amount—or Rs 1 trillion ($14.5 billion)—is stressed.
RattanIndia Power owns two coal-based power plants of 1,350 MW each at Amravati and Nashik in Maharashtra. It is also developing renewable energy projects. In June 2017, GE Energy Financial Services, the investment arm of General Electric, agreed to invest $90 million to develop solar power projects in India with RattanIndia Group.