Tag: Videocon Industries

Lenders slap personal insolvency cases on promoters of defaulting firms, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Banks are approaching the National Company Law Tribunal for invoking personal guarantees of defaulting promoters armed by the Supreme Court go-ahead for such action.

The latest data released by the Insolvency and Bankruptcy Board of India (IBBI) show that 56 new cases were filed in the first quarter ended June, almost half of the total 128 cases filed in the whole of fiscal 2021, as banks stepped up their recovery efforts from personal guarantors.

These include cases filed against promoters of Punj Lloyd, Amtek Auto, Videocon, DHFL, ABG Shipyard, Videocon, Varun Shipping, and Lanco Infratech.

Overall, a total of 201 cases have been registered against personal guarantors since the new law came into force in December 2019, 184 of which have been filed by financial creditors while 17 have been voluntarily filed by debtors.

Data from the IBBI show that creditors are chasing a total debt of Rs 36,014 crore through the personal insolvency process, which has been backed by personal guarantees of Rs 33,294 crore. Individual debtors have filed a relatively lower Rs 1,848 crore of claims backed by guarantees of Rs 791 crore.

The challenge

Anil Ambani, Kapil Wadhawan, Venugopal Dhoot had challenged proceedings against them under the Insolvency and Bankruptcy Code (IBC) to recover loans for which they had given personal guarantees.

They had argued that the resolution process would discharge them of all personal liabilities and guarantees and that the government was wrong to issue a notification that permitted lenders to initiate separate insolvency proceedings against them.

The guaranteed debt

According to an estimate, the top 10 personal guarantors have guaranteed debt of over Rs 1.6 lakh crore. Among the big names, former promoters of Bhushan Steel and Power Sanjay Singhal and his wife Aarti Singhal had furnished personal guarantees worth up to Rs 24,550 crore to take loans from a consortium of bank led by State Bank of India (SBI).

The former promoter of Reliance Communications, Anil Ambani, has also given a personal guarantee against the loan taken. Erstwhile promoter Wadhawan stands guarantee to loans taken by DHFL, which is sitting on debt of about Rs 90,000 crore, while Dhoot has also given a personal guarantee to a portion of Rs 22,000 crore loan to Videocon.

The Supreme Court order

The Supreme Court in May had held that the November 15, 2019 government notification allowing creditors, usually financial institutions and banks, to move against personal guarantors under the Insolvency and Bankruptcy Code (IBC) was ‘legal and valid’.

Post the judgement, a senior official of a public sector bank said banks are assessing the level of involvement of those directors who pledged their personal guarantee against the loan.

Banks have started receiving calls from some of the promoters for the exclusion of their personal guarantee from the non-performing assets. Some of them are coming forward to resolve bad loans to save their personal wealth.

Most of the promoters thought that once their case is admitted under IBC, their past obligations cease.

However, the order has generated fear among the promoters and directors who pledged their personal guarantee of losing their personal wealth as part of the resolution process.

The personal guarantees are likely to expedite the resolution process as the guarantor stands the risk of losing personal property.

The hurdle

Many of these promoters are being investigated for fraud and their assets are already attached by the investigative agencies. Getting these assets released from the law agencies will take time.

SBI action

SBI was one of the respondents to the 74 petitions and challenges by promoters on invocation of personal guarantees. It has been in the forefront of invoking guarantees of promoters of defaulting companies. It had invoked Rs 1200 crore of guarantees given by Ambani for defaulting companies Reliance Communications and Reliance Infratel.

SBI had also approached the Mumbai bench of the NCLT to initiate guarantees by the Videocon Industries Dhoot brothers totalling Rs 11,500 crore.

It had also taken Bhushan Power & Steel promoter Sanjay Singal to court to recover Rs 12,276 crore dues to the bank for which he was a guarantor. All these promoters had challenged these actions in court.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Videocon resolution may be back to square one after NCLAT stay, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


After NCLAT stayed the order of the NCLT of Mumbai Bench, the process of Videocon Industries’s liquidation case may start all over again. Legal experts also believe that SBI-led creditors may not do anything but the bid winner Anil Agarwal’s Twin Star may appeal in Supreme Court against the NCLAT order.

“As of now, NCLAT has stayed the order. The creditors (appellant) were possibly challenging the entire bidding approved by NCLT on the grounds that some procedures might not have been followed, opinions not being considered. Now there are high chances that the entire process can restart,” said Vikas Tomar, Partner, Indian Law Partners.

There are 35 financial creditors of Videocon, of which 19 major creditors, including SBI, Union Bank, IDBI, Central Bank, BOB and ICICI Bank approved the resolution, which includes the 95.85% haircut. But three minority shareholders, Bank of Maharashtra, SIDBI and IFCI rejected the resolution on the ground of low resolution and filed an appeal in NCLAT.

Large versus Minority Creditors versus Bidder

The plea of minority shareholders is heard and the whole case will move in a direction to get more benefits for the financial creditors.

“Banks are normally prepared to take a 60-70 per cent haircut on payments if an insolvency process is initiated. The bid was also rejected on the grounds that they should be compensated upfront and in cash rather than through NCDs. Accepting this bid will just increase the banks’ losses, and now their only option is to call for bids from interested parties,” said Sonam Chandwani. Managing Partners, KS Legal and Associates.

The main ground of the minority shareholders was the low resolution amount.

“The large financial creditors like SBI and others may prefer to keep quiet and wait for the court to do its process. But there are high chances that Anil Agarwal’s Twin Star Technologies may appeal in Supreme Court against NCLAT order,” said a legal expert who did not want to be identified.

There were 11 bidders for Videocon but only three had bid for the whole Videocon’s group assets. The majority of them had bid for only a particular division of the company. Hence on one side, there is a big hope that minority shareholders will recover more, but on the other side there the whole process may take a long time.

The Videocon resolution case has been one of the most dramatic in the IBC process. Starting from Chanda Kochchar, former MD and CEO, ICICI Bank losing her job and facing trials with investigative agencies for irregularities in the giving loans to the group, to the fresh challenge to the resolution process, it has been a bumpy road.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

BOM, SIDBI and IFCI reject resolution, move NCLAT, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


In an unusual move, lenders of Videocon Industries agreed to take the 95.85% haircut on the accounts. But not all. Out of the total 35 financial creditors, four have dissented and 12 have abstained from voting. The rest of the lenders voted for the resolution.

Out of four creditors who have decided to go against the resolution order of NCLT dated June 8, 2021, and appealed in the NCLAT, are bankers.

The dissenting financial creditors are Bank of Maharashtra, SIDBI and IFCI, while the other is ABG Shipyard, which holds O.024%.

The combined shareholding of the four dissenting creditors is around 4%.

“We are against the resolution because the quantum is very low. We do not believe that this is a fair valuation and hence we have appealed in the Appellate Tribunal,” said A S Rajeev, MD & CEO, Bank of Maharashtra.

Following are the percentage share of the creditors who rejected the Videocon Industries resolution plan:

Creditors Share Value
Bank of Maharashtra 1.97%
SIDBI 0.053%
IFCI 1.3%
ABG Shipyard Ltd 0.024%


Videocon valuation

The resolution team of the valuation experts concluded the total dues of Videocon Industries to Rs 4,069 crore. Whereas the liquidation value was Rs 2568.13 crore. The resolution plan of Twin Star Technologies, a company owned by the chairman of Vedanta Group Anil Agarwal, was approved against the actual dues of about Rs 71,000 crore.

“We should not only look at the balance-sheet value but think about the actual receivables as well,” added Rajiv.

Resolution process

There are many cases like Siva Industries, Jet Airways where financial creditors have taken a huge haircut. But among the high profile cases, Videocon Industries resolution is the only case where lenders have taken maximum haircut till date. Even the NCLT in its order observed this and made a sharp comment.

“As per the CoC approved Resolution Plan, Assenting Secured Financial Creditors would get only 4.89%, Dissenting Secured Financial Creditors would get only 4.56%, Assenting Unsecured Financial Creditors would get only very meagre amount of 0.62%. Out of total claim amount of Rs 71,433.75 crores, claims admitted are for Rs 64,838.63 crores and the plan is approved for an amount of only Rs 2,962.02 Crores which is only 4.15% of the total outstanding claim amount and the total hair cut to all the creditors is 95.85%. Therefore, the Successful Resolution Applicant is paying almost nothing and 99.28% hair cut is provided for Operational creditors,” the order said.

The top seven creditors which hold more than 7% of the debt and voted for the resolution in Videocon:

Creditors Share Value
State Bank of India 18.05%
IDBI Bank 16.6%
Union Bank of India + Corporation Bank + Andhra Bank 9.7%
Central Bank of India 8.43%
Bank of Baroda + Vijaya Bank + Dena Bank 6.93%
ICICI Bank 5.47%
PNB + OBC + UBI 5.02%

Liquidation takes over resolution

On one side, the top creditors want to wash away their hands and do not want to carry forward any stress, it’s the smaller lenders who are making some noise. Also, considering the huge loss to financial creditors, industry veterans and experts are criUnion Bank of India + Corporation Bank + Andhra Bankticising the whole resolution process.

Experts have been raising doubts over the whole resolution process.

In an interview with ETBFSI earlier, Siby Antony chairman of the ARC Association of India of said, “IBC is not the right solution. It is a resolution tool. If there is no resolution, automatically it goes to liquidation. That is a big problem. Resolution can be made if the underlying business is robust.”

Also, one of the top corporates Harsh Goenka has said that public money is being looted under resolutions. In the NCLT order itself, the bench has mentioned in the bracket (Hair cut or Tonsure, Total Shave).



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

Barring a few like Essar, banks have lost 80% dues in top NCLT resolutions, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The resolution of Videocon Industries close to the liquidation value has put the spotlight on realisations through the Insolvency and Bankruptcy Code mechanism.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore.

In over 363 major NCLT resolutions since 2017, banks have taken an average haircut of 80% over the past four years, the largest among them being Deccan Chronicle (95%), Lanco Infra (88%), Ushdev International (94%) and Zion Steel (99%).

While RBI has pointed to a recovery rate of 45% in IBC so far, barring the recovery rates in the top nine accounts, recoveries in other accounts average 24%. The top nine accounts were from the steel sector which led to good recoveries, while accounts in the power and infrastructure sectors struggle for buyers.

Lenders have been able eke out good recoveries in steel sector, with the highest being in the case of Essar Steel where lenders got 90% of their dues.

Fiscal 2021 drop

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, which is almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.

From its commencement in December 2016, 4,376 CIRPs have been admitted, of which 2,653 were closed till March 2021,

About 40% of the cases admitted by the NCLT were closed on appeal or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay. The extent of cases being referred to liquidation remains high at about 40% and only a quarter of such cases have seen the liquidation process come to a conclusion. The average realisation through liquidation has been a mere 3% of the claim amount.

Fiscal 2022 hopes

Although rating agency ICRA estimates that financial creditors could realise about Rs 55,000 crore to Rs 60,000 crore in FY2022 through successful resolution plans from the IBC. The higher realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, as more than 20% of ICRA’s estimated realisation for the year could be from these alone.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Banks ready to transfer 37 NPAs worth ₹92,000 crore to NARCL

Banking & Finance

[ad_1]

Read More/Less


Banks have so far zeroed-in on 37 stressed assets, with exposure aggregating to about ₹92,000 crore, that can be transferred to the National Asset Reconstruction Company Ltd (NARCL), which is being set up by lenders jointly.

The assets to be transferred to NARCL include those of Videocon Industries, Reliance Naval & Engineering, and Essar Power Gujarat and Coastal Energy, according to bankers. Banks had lent to these entities as part of a consortium.

“Suppose the ₹92,000-crore exposure is transferred to NARCL at 70 per cent haircut. So, it will buy the exposure at ₹27,600 crore. Of the ₹27,600 crore, lenders will get upfront cash of 15 per cent (₹4,140 crore) and the balance (₹23,460 crore) by way of Security Receipts (SRs), which are likely to have government guarantee (partial/full),” said an executive of a state-owned bank.

Upfront cash

The upfront cash that NARCL will give will result in provision write-back for the lenders, though it will be small.

“NARCL may buy all the loans put together at 30 per cent. But if the recovery is higher, say, 40 per cent, lenders will get the benefit via SRs,” the executive quoted above said.

He underscored that a few more Joint Lenders Forum meetings will be organised to arrive at a consensus on transferring more stressed assets.

The criteria prescribed by the Indian Banks’ Association (IBA) for the transfer of stressed assets to NARCL is that they should have been 100 per cent provided for, not be categorised as fraud, and should not be close to a resolution or recovery.

The IBA is spearheading the formation of NARCL in consultation with the Finance Ministry and the Reserve Bank of India. Stressed assets with principal outstanding of ₹500 crore and above, aggregating about ₹1.5-lakh crore, are expected to be transferred to NARCL.

Besides banks, state-owned non-banking finance companies in the power sector — Power Finance Corporation and Rural Electrification Corporation — are likely to contribute to the equity of NARCL and sell to it the stressed assets in their portfolio.

Will alter balance-sheets

NARCL may structurally alter the balance-sheets of lenders in such a way that it will further the government’s agenda of divesting its stake in IDBI Bank and privatising two public sector banks. Once chunky stressed assets are out of their books, the valuation of these banks will improve, making them more saleable, say market experts.

Finance Minister Nirmala Sitharaman, in her Budget speech on February 1, observed that the high level of provisioning by PSBs on their stressed assets calls for measures to clean up their books.

In this regard, she had said that an Asset Reconstruction Company and an Asset Management Company would be set up to consolidate and take over the stressed debt and then manage and dispose of the assets to Alternate Investment Funds (AIFs) and other investors for eventual value realisation.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,