Lowest offer for debt-laden Reliance Naval at 3% of total dues

Lenders, staring at huge haircut, seek legal opinion

Lenders to debt-laden Reliance Naval and Engineering (RNaval), which owns and operates a shipyard off the South Gujarat coast, have received bids as low as 3 per cent of the total dues of Rs 12,428 crore.

The company was sent for debt resolution under the Insolvency and Bankruptcy Code in January last year after it defaulted on its loans.
 
While the Naveen Jindal group has put in a bid of just Rs 350 crore, a last-minute offer from Hazel Mercantile, part of the Veritas group, has offered Rs 800 crore for the former Anil Ambani group company.
 
Even if the committee of creditors (CoC) accepts Hazel’s offer, then it would mean a recovery of just 6.4 per cent, which is less than the liquidation value of the company, said a banking source.
 
APM Terminal did not make the final offer, while GMS Dubai’s offer was below Rs 500 crore. The lenders have not yet taken any decision on the offers and are taking legal opinion on their next step, the source said.
 
With this, RNaval joins a growing list of bankrupt companies where lenders are recovering less than 5 per cent of their dues. In the case of Videocon Industries, Twinstar Holdings of the Vedanta group just offered Rs 3,000 crore, which was less than 5 per cent of the total dues of Rs 62,000 crore.
 
Similarly, in the case of Siva Industries, the lenders, led by IDBI Bank, had agreed to accept an offer from the promoter which was less than 5 per cent of the dues. The National Company Law Tribunal (NCLT), however, rejected the lenders’ application, saying it would rather use its “judicial wisdom” rather than the “commercial wisdom” shown by the CoC.

The Videocon case is pending in the NCLAT after some lenders opposed the low recovery accepted by other lenders. There are several other cases like Lavasa Corporation where debt resolution is still hanging fire.
 
Low recoveries by lenders have not only angered courts in the past but have also led to the Standing Committee on Finance to recommend steps to come out with a code for banks and resolution professionals. Asking for a thorough evaluation of the entire process, the committee said earlier this month that it was important to have a benchmark for the quantum of haircuts, which should be comparable to the global standards. The haircuts in many cases were alarmingly high at 95 per cent, it said.
 
In its report, the committee said 71 per cent cases were pending for more than 180 days in the NCLT, pointing to the deviation from the original objectives of the code as envisaged by lawmakers. About Rs 9.2 trillion of Indian banks is currently stuck in the NCLT after they took defaulters to court.