NCLT approves Cochin Shipyard's resolution plan for Tebma Shipyards

Banks to take huge haircuts as the plan proposes to pay only 9.74 per cent of the total admitted Rs 602 crore debt

The Chennai Bench of National Company Law Tribunal (NCLT) has approved the resolution plan of Cochin Shipyard (CSL) for Chennai-based shipbuilding firm Tebma Shipyards (TSL) under Corporate Insolvency Resolution Process (CIRP). 

Lenders will be taking a huge haircut since the CSL has proposed to pay only 9.74 per cent of the admitted debt of TSL, which stood at Rs 602.39 crore.

Jotun India, in the capacity as an operational creditor, had filed an application under Section 9 of IBC, 2016, against the corporate debtor Tebma Shipyard. The NCLT, through an order in September 2018, admitted the application and initiated CIRP as against the debtor by appointing N Kumar as the interim resolution professional.

According to CSL's resolution plan, the resolution applicant proposes a sum of Rs 65 crore as the resolution plan amount payable to all the stakeholders as full and final settlement and discharge of all the Claims of the corporate debtor, including the CIRP costs. 

Financial creditors to Temba Shipyards include State Bank of India (with admitted debt of Rs 339.22 crore), Andhra Bank (Rs 108.21 crore), IDBI Bank (Rs 49.15 crore) Syndicate Bank (Rs 39.67 crore), ICICI Bank (Rs 38.98 crore) and Punjab National Bank (Rs 27.16 crore). Total debt stands at Rs 602.39 crore and amount provided for the financial creditors under the CSL's plan is Rs 58.65 core, which is 9.74 per cent of pay out on admitted debt.

The Plan also mentions about two Excluded Ships, which are not required for continuing the current operations of the company and are occupying space at the Maple Yard of TSL, as an impediment for the revival of the company. It will sell both these ships and the financial creditors are entitled to receive the net ES sale proceeds or net ES scrap proceeds from the sale of "excluded ships", in addition to the amount provided in the plan.

While the liquidation value of TSL is around Rs 89.09 crore, the proposal is for Rs 65 crore. The Resolution Professional said that the Committee of Creditors have voted in favour of the resolution plan after deliberating upon these aspects and taken a 'commercial decision' by voting in favour of the plan "even if the Resolution Plan value is lesser than the Liquidation value in and by which they are interested in revival of the Corporate Debtor rather than the death of the Corporate Debtor by Liquidation," said the Order.