In a blow to McLeod Russel, Eveready Industries and other Williamson Magor Group (WMG) companies, the Delhi High Court has passed an ad-interim ex parte order of injunction preventing all these companies from selling or transferring any of their assets, changing their capital structure, or opting for any debt restructuring proposal.
While McLeod Russel and McNally Bharat Engineering (MBEL) — both WMG entities — have been pushing for debt restructuring with the former opting for sale of its tea estates to pare debt, sources said Eveready is on the lookout for a strategic partner to dilute its battery business and has been monetising idle land.
The court’s order restrains all these companies from carrying out their plans. KKR India, which had originally lent Rs 200 crore to WMG entities, had moved the Delhi High Court seeking relief over its exposure to the WMG group.
Over the past few years, out of 52 tea estates, McLeod has sold 19 gardens across Assam, Dooars and Africa for Rs 765.36 crore to pare high-cost debt, buy back shares and support the firm’s daily operations.
Another estate sale in Assam is underway for a consideration of Rs 28.15 crore. However, following the court’s stay, this transaction is being put on hold.
The court has also attached a bank account of McLeod in the course of legal proceedings and has ordered WMG entities to furnish details of their tangible and intangible assets as on March 31, 2019 and as on September 30, 2019 as well.
Earlier, the Calcutta High Court, while hearing an appeal by IL&FS, had also restrained these WMG entities from selling any of their assets or modifying their capital structure. However, it had later lifted its stay.
In a parallel development, Yes Bank, Techno Electric & Engineering and another creditor have moved Kolkata Bench of the NCLT appealing commencement of insolvency proceedings against McLeod to recover their dues. The matter has been adjourned to January 28, 2020 for hearing. Sources at Eveready said that they expect the court’s order to be vacated soon as it was ex-parte and has no impact on the operations or day-to-day business of Eveready or McLeod.
They added that Eveready is of the view that since it is neither a party to any agreement or arrangement with the petitioner, the ad-interim order against it is not legally tenable.
However, sources close to the developments around debt restructuring said that it would be extremely hard for McLeod to carry on its operations, unless it is able to raise some capital and, considering the financial position of this company, the sale of tea estates is the best way forward.
The lenders have appointed LSI Financial Services to undertake a techno-economic feasibility study, based on which the creditors would consider coming up with a resolution plan for McLeod outside the scope of NCLT. The study primarily focuses on the health of the gardens and the current & potential level of earnings before interest, tax, depreciation and amortisation (EBITDA) of McLeod if the creditors to the stressed WMG entity agree to recast the debt of around Rs 1,700 crore.
Despite positive earnings, McLeod’s financial performance has continued to be under stress as several Inter-Corporate Deposits (ICDs) amounting to around Rs 2,846 crore, given to various group companies, have remained unpaid. In the case of Eveready as well, which has a Rs 500 crore debt, ICDs worth Rs 397.77 crore given to various group firms haven't come back.