NARCL pays Srei lenders promised upfront cash – ET Infra

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National Asset Reconstruction Co (NARCL), the winning bidder for the bankrupt Srei twins, has distributed to lenders Rs 2,580 crore of cash accumulated in the distressed infrastructure financiers as part of the debt-resolution program at the Kolkata-based companies.

The cash was distributed as part of the Rs 3,180-crore upfront payment promised by the NARCL in its winning bid and was credited into the bank accounts in the wee hours of Saturday, four people familiar with the details said.

The payment of the cash to lenders means that NARCL now has 45 days to complete implementation of its plan including issuance of debentures and preference shares to lenders. These instruments can be encashed based on recoveries from the account in the future.

“The distribution of cash is an important milestone in the implementation of the plan. NARCL will now move for documentation, issuance of debentures and equity stake to lenders as promised in its resolution plan,” said a person aware of the details.

Canara Bank is the largest beneficiary receiving Rs 250 crore, followed by State Bank of India (SBI) at Rs 220 crore, Punjab National Bank (PNB) Rs 215 crore and Union Bank of India Rs 200 crore. As almost all lenders have fully provided for this loan, the recovery is likely to be written back to their bottom lines.

Individual lenders and NARCL could not be immediately reached for comment.

The Kolkata bench of the National Company Law Tribunal (NCLT) had approved NARCL’s plan to take over Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL) in August after lenders had approved the government-backed bad bank’s offer in February this year.

NARCL’s offer was valued at Rs 5,555 crore on a net present value (NPV) basis, higher than the Rs 5,526 crore offered by its nearest competitor Authum Investment & Infrastructure.

The offer by NARCL equates to a recovery of 17% on an NPV basis on total admitted total claims Rs 32,750 crore from financial creditors.

Cash Plus SRs
“The NARCL plan includes Rs 3180 crore of upfront cash and Rs 3487 crore of security receipts (SRs) guaranteed by the government for five years which will be redeemed once recovery is completed. Then there are also debentures and equity which can give creditors some upside in the future,” said a second person aware of the plan.

To be sure, the upfront cash offered by NARCL also included Rs 600 crore of payment from the bad bank to lenders according to the plan submitted to the NCLT. The current cash accumulated in the Srei twins is close to Rs 3000 crore. If cash continues to accumulate, then it is possible that all of NARCL’s upfront portion comes through this source.

The total committed payments of cash and SRs totalling Rs 6667 crore amount to a 20% recovery for financial creditors. Then there are Rs 8000 crore of debentures payable in six to eight years and also a 20% equity in the company which is all linked to the recoveries the bad bank can make.

Lenders expect to complete the full implementation of the plan by the end of October.

The Srei companies were taken to the bankruptcy courts in October 2021 on insolvency petitions filed by the Reserve Bank of India (RBI).

After the Kolkata NCLT had approved NARCL’s plan in August, losing bidder Authum had challenged it in the National Company Law Appellate Tribunal (NCLAT) offering an additional Rs 450 crore.

Though the tribunal has admitted Authum’s petition, it has not imposed any stay on implementation of NARCL’s plan as a result of which the bad bad bank has gone ahead and implemented the plan.

  • Published On Sep 26, 2023 at 12:48 PM IST

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