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McLeod Russel moves NCLT to resume tea estate sale to help it repay dues

Tribunal had stayed the sale after a financial creditor moved Kolkata bench of NCLT to recover dues of Rs 100 cr; McLeod says sale is part of restructuring plan, will help revive company

Avishek Rakshit  |  Kolkata 

Icra has downgraded the ratings of bank facilities of McLeod Russel India to [ICRA] B-/[ICRA] A4 from [ICRA] BBB-/[ICRA]A3

The Williamson Magor Group (WMG)'s stressed tea entity, McLeod Russel, has appealed to the (NCLT) to relax the stay order on sale of its gardens.

Earlier, after Techno Electric & Engineering, a financial creditor of McLeod moved the Kolkata bench of to recover its dues of around Rs 100 crore, the Tribunal had ordered McLeod not to sell any tea estates till further notice.

McLeod, while presenting its case before the Tribunal reasoned that the sale of assets is part of its restructuring plan which it has formulated to pay off its dues and bring the company to the black.

Over the past 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 consideration of Rs 28.15 crore. However, following the interim stay from NCLT, this transaction has been put on hold. Moreover, the company cannot sell any more gardens unless approves or lifts the stay.

Sources close to the creditor reasoned that Techno had pressed its case to obtain a stay on asset sale as it felt it is the best way to control McLeod from liquidating and exhausting its assets before the creditors are paid in full.

“There have been instances in the National Company Law Appellate Tribunal, when such stay was obtained to prevent a company from selling off its assets without paying back to the creditors. Citing this ground, Techno had pressed its case”, the source said.

On the other hand, apart from a debt restructuring proposal with the banks, asset monetisation is a key part of McLeod’s strategy to address the ongoing financial crisis, both at the company level as well as at the group level.

Its other group entity, Eveready Industries, has also been selling land parcels to reduce its own debt. Moreover, a strategic sale in Eveready is being chalked and Duracell, besides other interested are in talks.

However, the Calcutta High Court, earlier in this month, had passed an ad-interim (temporary) order of injunction restraining Williamson Magor & Co, one of the investment arms of WMG; McLeod and Eveready from transferring, alienating, or encumbering any of their tangible or intangible assets till an application filed by Infrastructure Leasing & Financial Services (IL&FS) was disposed of.

IL&FS had granted a term loan of Rs. 170 crore to WMG through Williamson Magor & Co. Although both McLeod and Eveready had appealed for a stay on the order, it was rejected.

Earlier this month, shareholders of McLeod had defeated all of the company’s special resolutions which included borrowing and lending money beyond permissible limits, besides others.

McLeod had moved the resolution as it felt that the debt restructuring would result in conversion of short term debts into long term ones which will be beyond legal permit and to bypass the legal clauses had sought approval from the shareholders.

Apparently, while the Calcutta High Court as well as has temporarily blocked McLeod from raising money by asset sale, the shareholders have defeated the resolution which may affect McLeod’s intention for debt restructuring.

First Published: Wed, September 18 2019. 19:39 IST
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