Foreign Banks Joust Over Arvind Loan Recast

The Arvind Mills loan recast package has pitted foreign banks against foreign banks.

On the one side of this spat are Commerzbank AG and Bank of Nova Scotia, which are opposing the deal tooth & nail, while on the other side, supporting the package, are foreign banks led by UBS Warburg, the largest overseas lender to Arvind with close to $100 million exposure.

"The recast package is a fair deal to the creditors. Some banks want better deals for themselves. I am giving up about 60 per cent of my claim. Every body has to make some sacrifice to revive the company," Michael Gellard, executive director, UBS Warburg said.

ABN Amro, which has about Rs 43 crore working capital exposure to Arvind, is also supporting the recast package along with others.

Moumita Sen, assistant vice-president, credit structuring, ABN Amro, said: "We are with the majority of the lenders which have been supporting the loan restructuring."

The company has the support of 83.4 per cent of the lenders (by value) for the restructuring proposal. While 6.3 per cent of lenders are opposing the package, 10 per cent have sought time to decide on their stance. State Bank of India is yet to make up its mind.

Going by the norms, if 75 per cent of the long-foreign lenders, long-term domestic lenders as well as working capital lenders support the scheme, it will be passed.

Commerzbank AG had last week filed a criminal case against senior executives of ICICI Ltd and Arvind Mills Ltd last week.

It said Arvind has diverted Rs 395 crore to its subsidiaries between 1999 and 2000. It had sold 35 per cent of its branded garment divisions Arvind Clothing Ltd and Arvind Fashions Ltd to ICICI, while the balance 65 per cent was transferred to AML's investment company which in tern pledged this holding to ICICI.

On February 28 ICICI and a few of the company's key lenders formulated the rehabilitation scheme for the company which, according to Commerzbank, provided for a "ratification of the unauthorised sale and lease back transactions".

"At the end of the day some of the lenders' agenda is to get better deal. I would say, the present deal is satisfactory to all. Otherwise, we would end up jeopardising the future of the company and all of us lose out," said Gellard of UBS Warburg.