Developments in the stressed assets’ space have picked up pace, with large assets seeing changes at various levels, according to a status check by the fourth piece in the weekly series and the last for April.
The spotlight continued to shine on the most notorious cases like Essar Steel and Jet Airways, while Uttam Galva witnessed some success even as Brookfield’s Hotel Leelaventure Ltd acquisition saw a new twist after ITC’s complaint.
Below are the details of the major developments during the week:
Essar Steel India Ltd’s Committee of Creditors (CoC) is sticking to its stand on how to distribute the capital ArcelorMittal has agreed to pay for acquiring the debt-ridden Indian company, as the bankruptcy resolution of one of India's most-indebted companies drags on.
The CoC has informed the National Company Law Appellate Tribunal (NCLAT) that operational creditors should be differentiated based on the collateral they possess, a person aware of the matter told VCCircle. This came after NCLAT observed that the CoC cannot discriminate between the operational creditors based only on the amount of their dues.
This comes after some operational creditors and British lender Standard Chartered cited discrimination and approached the Supreme Court, which stopped ArcelorMittal’s payments to hear the appeals.
In the ongoing battle for over 600 days now, the CoC now plans to approach the Supreme Court to settle the issue if the NCLAT does not accept its contention, the person said on the condition of anonymity as the matter is in court. The next NCLAT hearing is on 13 May.
The CoC has divided operational creditors of Essar Steel into those with claims under Rs 1 crore and those with higher claims. According to ArcelorMittal's proposal, operational creditors with claims below Rs 1 crore will get their dues but others will receive almost none.
Billionaire LN Mittal-owned ArcelorMittal had last year won a long-drawn auction to buy Essar Steel, which has a debt of over Rs 50,000 crore, for around Rs 42,000 crore.
Jet Airways heading for bankruptcy tribunal?
From Jet Airways’ board to its unpaid staff, all eyes are now on potential investors who may yet save the day with their binding bids that can be submitted by 10 May.
However, most experts fear the 25-year-old airline is facing the prospect of being taken to the bankruptcy tribunal.
Grounded since 17 April, the airline is saddled with more than $1 billion in debt.
A service provider has already fired a warning shot. Rajan Rakesh & Bros – the operational creditor with The Mirador brand of hotels -- cautioned Jet Airways that it would take the airline to the bankruptcy tribunal should it fail to pay its dues.
Jet Airways is currently under the management of 26 lenders led by SBI. The airline was put up for sale a fortnight ago.
Apart from four interested parties, British entrepreneur Jason Unsworth had expressed interest in acquiring a controlling stake in Jet Airways. He has been asked by the airline to take up the matter with its consortium of lenders. In a filing to the stock exchanges, Jet Airways said that Unsworth has been asked to interact with SBI Caps Ltd that is leading the bankruptcy resolution plan for the embattled carrier.
As of now, SBI Capital Markets, the investment banking arm of SBI, confirmed that it has shortlisted four investors -- private equity firms TPG Capital and Indigo Partners, the Indian government-anchored National Investment and Infrastructure Fund (NIIF) and the UAE's Etihad Airways, which already owns a minority stake in Jet Airways.
ITC stops Brookfield's Hotel Leelaventure deal
Markets regulator Securities and Exchange Board of India (SEBI) has asked Hotel Leelaventure Ltd not to act upon its deal with Canadian investment firm Brookfield Asset Management Inc. until further orders.
This comes a few days after cigarette-to-hotels company ITC Ltd moved the National Company Law Tribunal (NCLT) against debt-ridden Hotel Leelaventure alleging oppression of its rights as a minority shareholder (7.92%) and mismanagement. .
The debt-laden hotel chain had signed an agreement with Brookfield on 18 March to sell four luxury hotels, its hospitality business and the Leela brand for Rs 3,950 crore ($576 million then). It had also sought shareholder approval for the deal via a postal ballot, voting for which was to end on Wednesday.
Hotel Leelaventure said in a stock-exchange filing on Wednesday that it has received a letter from SEBI that the capital markets regulator is examining certain allegations made by ITC Ltd against the company, its promoters and JM Financial Asset Reconstruction Company (ARC) Ltd.
SEBI has also asked Hotel Leelaventure not to proceed with the postal ballot until further notice, the hospitality chain said.
In its complaint, ITC has also made allegations against the promoters of Hotel Leelaventure and JM Financial ARC, which holds a 26% stake in the hospitality group.
A consortium of US-based distressed assets player CarVal Investors and Asset Reconstruction Company of India Ltd (Arcil) has moved a step closer to acquiring Uttam Value Steels Ltd and Uttam Galva Metallics Ltd.
The CoC gave its approval for the Rs 2,400 crore bankruptcy resolution package for the two units of Mumbai-listed Uttam Galva Ltd. Of this, Rs 650 crore will be paid upfront and the rest will be staggered over a period of five years, persons in the know told VCCircle.
The consortium of lenders, led by State Bank of India (SBI), has a total exposure of around Rs 6,100 crore to the two companies. This means the lenders are taking a haircut of around 60% on the twin stressed assets.
The bankruptcy resolution professional of two companies, Rajiv Chakraborty of PwC, now has until 7 May to get the plan of CarVal and Arcil approved by the NCLT.
Sterling SEZ & Infra's lenders in a spot
The NCLT asked the lenders of Sterling SEZ & Infrastructure, a subsidiary of Sterling Biotech group, why they should not be held responsible for not informing authorities before accepting a settlement offer from absconding promoters, said The Economic Times.
The NCLT on Thursday gave 24 hours to the CoC to file its response.
“We are directing all the members of the CoC who have approved the settlement offer to come to the tribunal, failing which, we will direct an inquiry into the conduct of the lenders,” the NCLT said, according to The Economic Times.
On 12 April, the NCLT had reversed its order to allow the withdrawal of the insolvency process of Sterling SEZ, which is owned by brothers Nitin and Chetan Sandesara, who are believed to be abroad and are wanted by Indian agencies that are probing allegations of fraud against them.
As much as about 92% of the creditors had agreed to accept Sandesaras’ offer to pay about half the dues to settle the dispute. This was later questioned by the NCLT.
Brescon to raise distressed fund
Debt restructuring and turnaround advisory firm Brescon Corporate Advisors is gearing up to raise its first special situations fund, three years after a similar plan failed to take off.
Mumbai-based Brescon plans to mobilise as much as $200 million (Rs 1,400 crore) for the fund, founder and managing director Nirmal Gangwal told VCCircle.
The development comes after its 2016 plan to set up a Rs 6,000 crore fund in a tie-up with billionaire Ajay Piramal-led Piramal Enterprises Ltd fell through.