Lifeline for Reid & Taylor? Hong Kong bidder keen after others back out

If the Hong Kong firm fails to submit a resolution plan by February 7, the clothing firm will go into liquidation

After potential bidders, including numerous investment firms and asset reconstruction companies, backed out from placing bids for acquisition of the stressed assets of Reid & Taylor (R&T) India, thereby leading it to liquidation, Hong Kong-based SPGP Holdings (HK) Limited has evinced interest to acquire the firm.
 
A petition filed by the R&T employees’ association in the Mumbai bench of the NCLT stated that this Hong Kong company, which has a $250 million pool for investments in India, has been in talks with the association for a possible takeover.
 
In case the deal materialises, it will be the first instance under the Insolvency and Bankruptcy Code (IBC) when employees of an insolvent company have been able to rope in an investor to save the firm from liquidation.
 
“One of the directors of the investor, Pankaj Agarwal, had appeared before the NCLT and evinced interest in acquiring this company,” said Prasanna MS, general secretary of the R&T workers' association.
 
The workers have informed about SPGP Holdings’s potential interest to the resolution professional who in turn has to now undertake a due diligence process, check credibility of SPGP Holdings and communicate it to the Committee of Creditors (CoC).
 
Sources said that the 270-day period under the IBC framework lapsed on January 1 and thus the company has to go into liquidation. “Now, if SPGP is interested, it has to directly submit a resolution plan to the NCLT before February 7,” a source among the company’s creditors said.
 
Lenders are seen taking a huge haircut on the sale of R&T as its total debt amounts to over Rs 4,000 crore, but the liquidation value of R&T is estimated around Rs 150 crore.
 
Sources suggested that a resolution plan, if it is finally submitted by SPGP Holdings, will cover the liquidation value only.
 
“After a resolution plan gets submitted and the NCLT asks us to review it, we need to check if it would be worthwhile to pass that plan or liquidate the company for recovery of dues. The asset quality of R&T is good but we are perplexed why potential bidders didn’t submit any bid at all,” the lender’s source said.

After Edelweiss ARC dragged R&T to NCLT in April 2018 to claim its pending dues, companies like UV ARC Ltd, ARCIL, Suraksha Asset Reconstruction, CAP Homestead Financial Holdings, Mauritius (The Carlyle group), Finquest Financial Solutions, Invent ARC, Assets Care & Reconstruction Enterprise and Phoenix Arc had evinced interest.
 
However, none of these companies finally submitted any bid. R&T’s competitors like Raymond, Arvind, Reliance and others were also approached to take over the firm, but none of them had apparently shown any interest.
 
A source among the lenders said at the last moment, after the window for placing bids closed, Silver Point Luxembourg Platform had come up with a resolution plan but it couldn’t be passed in the CoC.
 
“There were some concerns because of which we did not approve the plan,” the source among the lenders said.
 
S Kumar’s Nationwide Ltd, the parent firm of R&T, is also undergoing insolvency resolution. R&T has a large facility in Mysore. On account of shortage of working capital, the company is running at 40 per cent of its installed capacity and workmen haven’t been paid for the last one month. For the junior to senior management, salaries are due for the last 2-3 months.