DCHL lenders seek MCA help for arbitrator to resolve debt woes

Lenders to the debt-ridden Deccan Chronicle Holdings (DCHL) are trying a new way forward to expedite the loan recovery process. They have suggested that the ministry of corporate affairs (MCA) intervene on the need for a court-appointed arbitrator to resolve the issues related to collateral securities pledged with various banks and submit the findings to the Andhra Pradesh High Court.

?We, bankers, have suggested an independent court-appointed arbitrator to check the issues related to collaterals, title deeds etc., besides the hypothecation of intangible assets,? a banker, who has relatively a sizeable exposure to DCHL, told FE.

The promoters had offered their shares as collateral security to some of the lenders for their financial assistance and a few have invoked the pledge and appropriated the same against the dues payable to them. ?If an arbitrator is appointed, he can verify the documents signed by the management and the bankers and, then, submit the findings to the court. This will expedite the process, which, otherwise, is a time-consuming process,? an analyst from Karvy said.

?At this juncture, there is no use going into how the whole issue ballooned into a huge debt crisis; we should rather find an amicable solution for the sake of shareholders who were never in the know of this mammoth debt,? added the analyst.

?Bringing all lenders under an agreement is a daunting task until the court decides on an arbitrator to resolve this issue,?’ said the Karvy analyst. All lenders, including financial institutions, have been demanding unlocking DCHL brands and selling off their assets before there is a further deterioration of their value.

A source close to the lenders and the DCHL management told FE that a few lenders were unhappy with the ?compromise formula? put forth by the DCHL management. The source refused to comment on the nature of the proposals. ?The company management has adopted a go-slow approach and the initial proposals put forth by them does not have any clarity as of now,? said another banker from a public sector bank.

The company had earlier told stock exchanges that its board has approved a proposal to arrive at a compromise with its lenders, in line with provisions of the Companies Act. A compromise formula could pave the way for the restructuring of the company in order to pay off debts amounting to over R3,987.5 crore as of September 30, 2012, it had said.

? We are still negotiating with the bankers and trying to formulate a scheme for restructuring the liabilities,?’ a DC counsel told FE. The company has claimed fixed assets, including intangible assets under development, at R2,905.31 crore, its liabilities amounting to R3,987.5 crore after restructuring of the operations of the company and recasting of the financial statements.

In the process, the banks have already made a beeline to the Andhra Pradesh High Court and the Debt Recovery Tribunal through the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) to claim their share in the recovery process. For instance, after IDBI, which has invited bids by March 11 for transfer of trademarks, Kotak Mahindra Bank is next in line to caution the public not to deal with any intangible assets related to DCHL as the company has hypothecated the trademarks, trade names, copyrights and logos. The Debt Recovery Tribunal (DRT) has already served a notice for attachment of DCHL properties, which include the printing press of the company. The amount mentioned in the possession notice was R50.25 crore towards the recovery.

Apart from banks, GE Capital Services India is also seeking to take possession of the printing presses as DCHL owed R100 crore to purchase machines under a hire-purchase agreement, and is seeking recovery of the amount through a civil court.

Various financial institutions, such as IFCI, Jammu & Kashmir Bank, Axis Bank, ICICI Bank, Yes Bank, Tata Capital, PVP Capital, National Pension System Trust and Royal Sundaram Alliance Insurance, Photon Infotech, Adonis and Concast Group, have moved the high court.

The promoter stake in the company has been reduced to 38.40% from 73.83%, as on September 30, 2012, with lenders invoking pledged shares and net worth eroding by more than 76%. There were pending sell orders of 836,551 shares, with no buyers available. The total liabilities stood at R4,042 crore by September 2012, up by more than six times in one-and-a-half years from R559 crore in March 2011.