Bank of Baroda, Credit Suisse sell Zee Entertainment-pledged shares

Bank of Baroda and Credit Suisse sold part of the Essel group promoters’ shares in Zee Entertainment Enterprises that were pledged with them in order to recover debt. 

While Essel group officials expect them to sign a moratorium agreement as soon as possible, the firms said a Reserve Bank of India circular issued in February 12 last year is expected to hit the standstill proposal by the Essel group promoters, which disallows any loan restructuring or standstill unless 100 per cent of lenders agree and they make full provisions.

On February 1, banks sold 7.4 million shares of Zee worth Rs 267 crore according to stock exchange data. 

The promoter entities of Essel group had raised debt securities from mutual funds and banks to invest in various businesses. But their investments in infrastructure sector led to losses for the group. A recent fall in group share prices led to margin calls by banks as the group companies lost Rs 15,333 crore worth of market capitalisation since January 1 this year (see chart).

When contacted, an Essel spokesperson said: “At a minuscule level, we have noted the sale of some shares and the same has been informed to the regulators and exchanges. That said, lender specific information cannot be shared. However, we wish to reiterate that LAS (loan against shares) lenders continue to support us and a written understanding is in the process of getting signed, with lenders covering 95-97 per cent of our LAS portfolio over this weekend,” the spokesperson said. 

The spokesperson said the mutual fund LAS lending does not come under the purview of the Reserve Bank of India’s February 12, 2018, circular, which directed banks to refer large accounts (of over Rs 2,000 crore of aggregate exposure) to the bankruptcy court if they are not resolved within 180 days after default. Loans can be restructured if approved by all lenders (100 per cent). 

Among the banks, YES Bank has a Rs 3,300 crore exposure in the promoter entities of Dish TV. After the massive share price fall in Dish TV in the last two weeks, YES Bank initiated talks with the promoters of the firm to recover its loans as the value of shares have dropped below the prescribed ceiling. The Essel group promoters have promised to make good any shortfall in the pledged shares and has decided to top up shares as per the prevailing RBI norms.

In an unprecedented open letter to lenders, Essel group promoter Subhash Chandra has promised to return loans taken from lenders by selling businesses. The group is in talks with a clutch of investors to sell part of its stake in the flagship Zee, which had a market value of Rs 34,240 crore as on Friday. Chandra also said the Dish TV and Videocon d2h merger was an error that resulted in a big loss for both him and his brother Jawahar.