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Stressed assets this week: Jet in limbo; ABG Shipyard heads to liquidation
Photo Credit: Reuters

During the January-March quarter, 73 cases ended in liquidation, taking the total number of such cases to 378 since the implementation of the Insolvency and Bankruptcy Code (IBC) two years ago, showed the latest data by the Insolvency and Bankruptcy Board of India.

Cumulatively, since the IBC was implemented two years ago, the total number of cases admitted by the end of March 2019 stood at 1,858. Of these, 152 cases have been closed on appeal or review or settled, while 91 have been withdrawn, and resolution plans for 94 have been approved.

From all the resolutions done so far, financial creditors have realised around 57% of their claims.

The IBC was set up to resolve cases of corporate bankruptcy in a timely manner. Only a third of these cases took more than the stipulated 270 days. For 1,143 ongoing resolution cases, the deadline has already been breached.

In the first weekly wrap for distressed assets for the month of May, we look at this week’s top developments.

Jet Airways

The now-grounded carrier Jet Airways is struggling even more as none of the potential bidders have yet shown interest in buying a stake in the airline.

The cash-strapped airline’s stock has been battered, and the bidders have until 10 May to submit their offers.

Three of the four qualified bidders -- Etihad Airways, TPG Capital and Indigo Partners -- have not signed non-disclosure agreements necessary for conducting due diligence, with just days left now to submit their final bids, The Economic Times newspaper reported, citing persons in the know.

State Bank of India (SBI), the top lender to ailing Jet Airways, said that the burden of liabilities and losses for the airline is high and that investors face the challenge of reversing its negative net worth before it can fly again.

“Liabilities and losses are considerable," Rajnish Kumar, chairman of SBI, said in an interview with Bloomberg Television on Thursday.

ABG Shipyard

Among the top 12 distressed cases, shipbuilder ABG Shipyard will go for liquidation as its resolution plan by sole bidder Liberty House was rejected by its lenders.

A bankruptcy court ordered liquidation of the debt-laden company almost two years after the Reserve Bank of India asked lenders to initiate bankruptcy resolution proceedings against ABG Shipyard and 11 other companies under the IBC.

The National Company Law Tribunal (NCLT) sent the company into liquidation on 25 April, ABG Shipyard said in a stock-exchange filing on Wednesday.

ABG Shipyard is the second shipbuilder to be sent to liquidation after Bharati Defence and Infrastructure Ltd in January this year.

R-Com

Anil Ambani-led Reliance Communications Ltd (R-Com) on Tuesday withdrew its petition challenging an order of the NCLT that allowed insolvency resolution proceedings to be initiated against the company.

The debt-ridden telecom firm has now chosen to go ahead with the resolution process under the IBC.

In May last year, R-Com had filed a petition before the National Company Law Appellate Tribunal (NCLAT) against NCLT’s order, which was passed on a plea by global telecom gear maker Ericsson over unpaid dues.

NCLT had on 15 May last year admitted an insolvency petition by Ericsson against R-Com and two of its subsidiaries -- Reliance Infratel and Reliance Telecom. The tribunal had also appointed an interim resolution professional to run the company.

The NCLAT stayed the NCLT’s orders a fortnight later.

In February this year, R-Com had announced its decision to opt for insolvency proceedings following its failure to execute the sale of assets that would help pay back its lenders.

R-Com owed banks $7 billion in March 2017, when it last made its debt level public, and more to vendors.

Jaypee Infratech

Jaypee Infratech Ltd is caught in a fix as its creditors have rejected Suraksha Realty-led consortium's sole bid to acquire the developer.

After three days of voting, only 23% of the committee of creditors voted in favour of Suraksha Realty's resolution plan. This gives NBCC (India) Ltd another shot to buy the distressed company with a debt of around Rs 9,800 crore.

On Wednesday, the government granted its approval for a revised offer by state-owned NBCC to take over the debt-ridden developer after lenders had previously rejected its bid.

The NCLT will hear the case on May 6 and may grant an extension period for resolution. The developer will then head for a third round of bidding.

Ruchi Soya

Yoga guru Baba Ramdev-owned Patanjali Ayurved Ltd has successfully got an approval from lenders to Ruchi Soya Industries Ltd for its revised offer to acquire the debt-laden edible oils maker.

The revised proposal of Rs 4,350 crore in cash upfront was nearly Rs 200 crore more than it had offered earlier. It pipped Adani Wilmar Ltd’s bid of Rs 4,100 crore.

Ruchi Soya has total outstanding dues of about Rs 12,000 crore, with around Rs 9,345 crore owed to its financial creditors led by State Bank of India.

Approved with a 53% haircut for lenders, the offer excludes a capital infusion of Rs 1,700 crore.

Lanco Group

Private sector lender Axis Bank has dragged two more Lanco group companies to the bankruptcy tribunal for defaulting on their loans, intensifying an ongoing legal battle between the private sector bank and the Hyderabad-based infrastructure and energy group, two persons in the know told The Economic Times.

The bank has lodged insolvency cases against Lanco Kondapalli Power, an Andhra Pradesh-based gas-fired power project, and Lanco Solar, which manufactures solar panels and sets up rooftop solar projects, the report said.

Axis had in August last year filed an insolvency petition against Lanco Amarkantak Power, a Chhattisgarh-based thermal power project of Lanco group, which the latter has challenged.

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