McLeod Russel signs ICA with its banking lenders for debt resolution

Plan will have a mix of capital infusion by promoters and recast of balance debt. McLeod owes banks Rs 1,800 cr; with unpaid interest, the total is about Rs 2,300 cr

Banking lenders to McLeod Russel India have signed an inter creditor agreement (ICA) as part of debt resolution efforts.

Disclosing the signing of ICA  with its consortium of lenders, the company said in a stock exchange filing on Friday, the Reserve Bank of India (RBI) issued directions for ‘Prudential Framework for Resolution of Stressed Assets’ which came into immediate effect i.e. June 7, 2019.

Pursuant to the provisions, all the banking lenders have signed/executed an inter creditor agreement (ICA) to provide for ground rules for finalisation and implementation of resolution plan in respect of borrower/company, the notice read.

Sources said, “Banks are working on the resolution and it will get completed very soon.”

Broadly, the plan will include a combination of capital infusion by promoters and restructuring of balance debt. McLeod owes banks about Rs 1,800 crore and with unpaid interest, the total amount is said to be around Rs 2,300 crore.

The filing to the exchanges comes about two months after the withdrawal insolvency proceedings filed against the company by Techno Electric & Engineering, a financial creditor.

Discussions with banks for a comprehensive debt restructuring under June 7, 2019 circular of the Reserve Bank of India (RBI) had been in the works for a while. However, the process was paused when Techno filed an application before the National Company Law Tribunal (NCLT) for initiating corporate insolvency resolution process (CIRP) against the company.

The application was admitted. But McLeod reached a settlement with the creditor and the NCLT accepted an application for withdrawal under Section 12A on September 3.

The debt resolution discussion with banks resumed thereafter. Some lenders were already on board. The company’s notes to first quarter results had mentioned that the ICA for arriving at and implementing the resolution plan had already been confirmed and signed by certain lenders.

The lenders were in the process of re-vetting the techno economic viability (TEV) study and also obtaining the possible credit rating of the company to implement the resolution plan recommended by SBI Capital Markets Limited, it had said.

For the last couple of years, McLeod has been trying to pare debt incurred largely on account of extending financial support to group firm, McNally Bharat Engineering. Between March 31, 2019 and March 31, 2020, it had even disposed of 17 estates for around Rs 764 crore.

However, even after the disposal of estates, McLeod continues to be India's largest bulk tea producer with 44 million kg of production; including Africa and Vietnam, its total production is around 73 million kg.

Timeline

 

August 6: NCLT, New Delhi, admits application filed by Techno for initiating CIRP against McLeod Russel

 

August 29: McLeod files application for withdrawal from CIRP

 

September 3: NCLT, New Delhi, allows application for withdrawal

 

November 5: McLeod informs stock exchanges about inter creditor agreement with consortium of lenders