KSL to give prior notice on CDR plan to FCCB holders

Bombay High Court also directs Tayal group firm to give details of divestment of realty arm

The Bombay High Court today directed KSL Industries, a textile-cum-realty firm owned by the Pravin Kumar Tayal group, to give its bondholders a 24-hour notice before implementing any corporate debt restructuring (CDR) plan. The move will give the bondholders the necessary breathing space to move court against the CDR, if they are not in agreement with the terms of such a plan.

The direction came during the hearing of a winding up petition filed by the Bank of New York Mellon, the trustee and custodian of the foreign currency convertible bonds (FCCBs). KSL defaulted on repayment of $90 million (Rs 500 crore) due to FCCB holders in May. KSL Industries is seeking to restructure loans worth some Rs 700 crore due to state-owned lenders, including Punjab National Bank, Union Bank of India and UCO Bank. This is part of the Rs 2,811-crore loans sought to be restructured by the Tayal group.

The court also said any CDR plan, so approved by the banks, will not affect the rights of the bondholders in the present case. It also barred KSL from selling or diluting stakes in fixed assets or any of the subsidiaries without a two weeks’ notice to bondholders.
 

GAG ON TAYALS
Court directions

• Prior notice to FCCB holders on implementation of CDR 
• Prior notice on any sale of fixed assets 
• Prior notice on sale of stakes in subsidiaries 
• Submit details of divestment of Reward Real Estate
• Submit detailed response to the winding up petition in three weeks

Janak Dwarakadas, counsel for the petitioners, said KSL’s CDR plan could affect the interests of the bondholders. “The CDR process involves an opening of trust and retention account. Once this is done all the receipts of the company will be farmed into this account from which the creditors will be paid off,” he contended.

He argued that since the bondholders have already moved for the liquidation of the company, they should not be prejudiced by the CDR process. The bondholders also brought before the notice of the court the unauthorised dilution of the real estate subsidiary called Reward Real Estate. Reward holds key real estate assets of the company in Nagpur and Nashik, among others, and it was sold off to pay other creditors, he said.

Dwarakadas said KSL has divested this subsidiary in contravention of the provisions of the FCCB trust deed. He sought particulars of this divestment and requested the court to bar any future divestment before paying off defaulted bonds. “We don’t want a situation where there are no assets left to liquidate,” he said.

KSL counsel argued that there cannot be a bar on these, saying it would affect the CDR process. But he offered to intimate the bondholders of the approval of CDR plan and the dilution of assets, if any, in advance. The court also directed the company to submit the particulars of divestment of Reward Real Estate to the bondholders within three weeks. The next hearing is scheduled for August 16.