Banks, Fis Reject Nri Bid To Settle Ms ShoesDues

A consortium of banks and financial institutions has refused to entertain a proposal moved by a US-based company for settling dues of MS Shoes (East) owed to financial institutions and the Housing and Urban Development Corporation (Hudco) in exchange for the allotment of a four-star guest house property by Hudco to the Pawan Sachdeva-promoted company.

The financial institutions' consortium led by the Tourism Finance Corporation of India and the Industrial Development Bank of India has refused to recommend the proposal to Hudco after the US company failed to furnish the necessary documents indicating its financial worth. While the TFCI has an exposure of Rs 17 crore, the IDBI had lent Rs 80 crore to MS Shoes for the guest house project.

 

Sources said the allotment decision of the four-star guest-house complex will now be taken by the Union ministry of urban affairs, Hudco's nodal ministry.

The US-based Global Acquisitions and Management Inc, floated by a group of NRIs, had informed the FI consortium of its willingness to invest the required funds into MS Shoes by picking up shares equivalent to 48 per cent of its equity that was pledged with the FIs as mortgage.

The consortium, which includes the Bank of Travancore and the State Bank of Patiala, with a total loan outstanding of Rs 202 crore to MS Shoes, had asked Global Acquisitions to submit audited balance sheets, including that of group concerns, and sources of funds, including letters of comfort from banks.

This was in response to the US company's proposal for a one-time settlement to the banks and financial institutions provided Hudco reinstated the guest house-cum-restaurant and commercial complex to MS Shoes.

MS Shoes, which was initially awarded the built-up complex by Hudco, defaulted on its payments after the collapse of its public issue in February 1995, following which Hudco cancelled the contract. Global Acquisitions has proposed that it will pay about Rs 40 crore due to Hudco as second instalment, without interest payments, within four months of the receipt of the allotment letter and the balance of around Rs 20 crore after it gets the completion certificate from the MCD.