Following Techno Electric & Engineering’s appeal at the National Company Law Tribunal (NCLT)’s Kolkata Bench to initiate insolvency proceedings against McLeod Russel, a bank has followed suit.
In a regulatory filing with the BSE, while declaring its financial results for the quarter ended September, McLeod said: “During the quarter, one of the bankers issued a notice of default and recalled the amount granted under various facilities. The said banker and another lender have filed petitions to initiate proceedings under the Insolvency and Bankruptcy Code...These petitions are, however, yet to be admitted by NCLT.”
Sources say the hearing on this matter will be next month.
Other lenders to McLeod and its other group companies have also obtained injunctions against disposal of McLeod’s assets, pending settlement of their dues.
The Williamson Magor Group (WMG) company, which this year lost its crown as the world’s largest tea producer, has been selling gardens to pare debt of around Rs 2,000 crore. Over recent years, of the 52 tea estates it once owned, McLeod has sold 19 gardens across Assam, Dooars and Africa, for Rs 765 crore. The aims was to pare high-cost debt, buy back shares and support daily operations.
Another estate sale in Assam is under way, for about Rs 28 crore. After an interim stay from the NCLT, this transaction has been held back. Also, the company cannot sell any more gardens unless NCLT lifts the stay.
Sources aware of this development feel Techno pressed its case for a stay on asset sale as it felt this was the best way to prevent McLeod from being liquidated and exhaust its assets before the creditors were paid fully.
In the notice, McLeod said it had taken various measures to overcome the current financial situation, such as reduction in operational costs, monetising group assets (like tea estates and land parcel sales), including holdings of other group companies, and proposals for restructuring of borrowings to make these sustainable.
A resolution process of the stressed assets has already been initiated by the bankers and an Inter Creditor Agreement (ICA) for working out a suitable resolution plan, outside the scope of NCLT, is under consideration. The lenders have also appointed an independent professional for carrying out a techno-economic viability study and to recommend an overall plan and possible course of action.
Despite positive earnings, McLeod’s financial performance continues to be under stress. Inter-corporate deposits amounting to Rs 2,846 crore, given to various group companies, remain unpaid.
“All these have resulted in mismatch of current resources vis-a-vis commitments and obligations and liquidity constraints, causing hardship in servicing the short-term and long-term debts and meeting other liabilities on their falling due for payment”, McLeod said.
Earlier this month, the shareholders rejected all the company’s special resolutions on the issue, including borrowing and lending money beyond permissible limits, besides others.
While hearing an appeal from IL&FS against Williamson Magor & Co, a WMG company, the high court here had passed a temporary order of injunction restraining Williamson Magor & Co, McLeod and Eveready (all WMG entities) from transferring, alienating or encumbering any of their tangible or intangible assets till the application of IL&FS was disposed off.