JC Flowers ARC makes claim on Subhash Chandra's no-compete fees

ARC says no-compete fees received from Sony should be used to repay local debt

JC Flowers Asset Reconstruction Company has asked the National Company Law Tribunal (NCLT) to use no-compete fees to be received by Essel group founder Subhash Chandra from Sony to repay its dues worth Rs 377 crore. 

Chandra had given personal guarantees to the loans extended by YES Bank to Essel Infrastructure that later turned bad.

JC Flowers ARC had acquired the bad loans of the Essel group from YES Bank in May last year and has moved court to recover its dues. The matter will be heard on Thursday. 

JC Flowers has said that Chandra will receive the no-compete fees of Rs 1,100 crore from Sony through a Mauritius-based entity. This will be part of the merger between BSE-listed Zee Entertainment Enterprises and Sony India’s television business.

It argued that the funds should be brought to India to repay lenders.

Chandra plans to use the no-compete fees to increase the family stake in the merged entity from two per cent to 4 per cent.

Zee Entertainment Enterprises did not comment on the matter. An email sent to JC Flowers ARC did not elicit any response.

Few other lenders — Axis Finance, IDBI Bank and IMAX Co. — have also objected to the merger in the court and are seeking their dues. 

Earlier, media reports had said JC Flowers ARC and Zee promoters were in talks to settle the matter but an industry source said the talks have made no headway.

The merger between Zee and Sony has already received approval of the Competition Commission of India (CCI) and the shareholders. It would create a TV entertainment network with 24 per cent market share.

Zee has already paid the dues to IndusInd Bank, Standard Chartered Bank and the Indian Performing Rights Society (IPRS) to make sure that the merger goes through. 

Apart from exposure to Essel entities, YES Bank also had a significant exposure to Dish TV India, a satellite TV broadcaster.

This Rs 5,270-crore loan was also acquired by JC Flowers ARC. It was sold by YES Bank as part of the Rs 48,000-crore bad loan portfolio to clean up its own balance sheet.

Once the merger is complete, Sony Pictures Networks will own a little more than 50 per cent stake while the Chandra family will own 3.99 per cent.

The public shareholders of Zee Entertainment will own the rest.

The merger was first announced in September 2021 and an agreement was signed in December same year.