Lenders plan to send more companies to NCLT

Lenders plan to send more companies to NCLT

Tightening of the Insolvency and Bankruptcy Code (IBC) to keep willful defaulters from bidding for assets has given lenders a short in the arm.Banks, armed with the new rule, are gearing up to send more accounts to the National Company Law Tribunal (NCLT), especially those that have gone through the strategic debt restructuring (SDR) process in the past two and a half years but failed to find a resolution.

Since the Reserve Bank of India (RBI) issued the SDR guidelines, banks have converted debt into equity in 20 companies but managed to divest stake only in one company— Adhunik Power.“The SDR scheme failed as there are no buyers for the stressed assets

Promoters are still running the companies but with lower debt burden.Bankers have not found any takers after they converted their loans into equity,” said a lender.Of the total 26 companies, Alok Industries, Monnet Ispat and Electrosteel Steels are on the first list sent to the NCLT.

Only the loans of Adhunik Power were taken over by Edelweiss atasteep discount.Banks are worried over the fate of Reliance Communications (RCom) —the largest of SDR accounts —whose debt conversion is scheduled in the end of December

“We have to see how we resolve this case, considering the company´s asset sale plans failed to materialise due to a pending case in court,” said a banker.RCom, withadebt of Rs 38,000 crore, is currently negotiating on the price at which banks will convert debt into equit

While the lenders are not ready to convert the loans at the preagreed price of Rs 24.71ashare, RCom is insisting that banks convert at this price —taking into account the RBI guidelines and the reference date of June 2 when the firm went through the SDR process.

Banks, on the other hand, want to convert debt into 51 per cent of equity at the current market price of Rs 14 a share. The company has recently defaulted to its bond holders overseas.In many cases that have undergone SDR, banks have failed to appoint their nominees on the board.

A bank sources said they would have to send all these companies to the NCLT for resolution, as they were unable to find buyers and can´t allow promoters to run the companies.

NCLT hears Mistry arguments

The National Company Law Tribunal (NCLT), Mumbai Bench, on Wednesday began hearing on former Tata Sons Chairman Cyrus Mistry´spetition against Tata Sons.TheNCLT is hearing the petition after National Company Law Appellate Tribunal had asked the Mumbai Bench to hear the merits of the case, in which Mistry alleged oppression ofthe minority shareholders. His family owns 18.5percents take inTata Sons.

The Business Standard, New Delhi, 23th November 2017

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