Banks transfer McLeod Russel loan accounts to NARCL for debt resolution

ICICI Bank and seven lenders assign McLeod Russel's Rs 1,104.69 crore debt to NARCL, raising hopes for restructuring. IndusInd Bank stays out, while JC Flowers ARC holds a 24.39% stake

A majority of lenders have assigned their loan accounts in India’s largest bulk tea producer, McLeod Russel India, to National Asset Reconstruction Company Limited (NARCL), raising hopes for a faster debt resolution.  In an intimation to the stock exchanges on Saturday evening, McLeod Russel informed about the assignment of loan accounts and financial assets with ICICI Bank (lead bank) and seven other banks in the consortium to NARCL under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002 (SARFAESI Act).  The tea major said that ICICI Bank, the lead bank of the consortium, in a letter dated March 15, 2025, intimated that the consortium of lenders to McLeod Russel India (comprising ICICI Bank, State Bank of India, HDFC Bank, Axis Bank, Punjab National Bank, UCO Bank, Indian Bank, and RBL Bank) had assigned the loan accounts and financial assets, together with all underlying securities, guarantees, rights, title, and interest, in favour of NARCL.  This was done jointly through the Assignment Agreement dated March 12, 2025, under Section 5 of the SARFAESI Act.With the assignment of financial assets, NARCL has become the lender and secured creditor, with all rights, title, and interest vested in it in respect of the financial assistance extended by the consortium of lenders, the company said.  The only bank in the consortium that has stayed away from the Assignment Agreement is IndusInd Bank.While announcing its December quarter results, McLeod had disclosed that lenders had invited expressions of interest (EOI) for the sale or assignment of debts aggregating to Rs 1,104.69 crore, representing the principal amount thereof.  This was to be carried out through the Swiss Challenge Bid Process based on an existing offer by an asset reconstruction company (ARC). The reserve price for the bid process was Rs 700 crore.  However, it did not elicit any response.McLeod’s total principal outstanding debt stands at Rs 1,461.06 crore.  Yes Bank had earlier assigned its loan to JC Flowers ARC, which now holds a 24.39 per cent share. IndusInd Bank has a 4.90 per cent share.Sources at McLeod Russel indicated that the company would now have to deal with fewer lenders—NARCL, IndusInd Bank, and JC Flowers ARC—and could present a holistic roadmap for restructuring.Discussions with lenders on debt restructuring had been ongoing for about six years.  Even as these discussions continued, lenders and creditors had filed petitions before the Debt Recovery Tribunal and under the Insolvency and Bankruptcy Code with the National Company Law Tribunal, Kolkata.Four proposals, including a one-time settlement offer, were made by McLeod Russel with support from Kolkata-based electrode paste maker Carbon Resources.  However, no progress was made, and in the meantime, fresh stress engulfed the industry, while the agreement period with Carbon expired.McLeod Russel operates 33 tea estates in India, covering 21,000 hectares of tea cultivation.  It also owns six tea estates in Uganda through its wholly owned subsidiary, Borelli Tea Holdings.McLeod’s troubles mounted as it provided loans and advances to support group companies, notably McNally Bharat Engineering Company, which later went into bankruptcy. Additionally, an adverse industry cycle exacerbated its financial woes.With the tea season kicking off, any restructuring plan that is worked out afresh will have to factor in market conditions, sources indicated.