Moser Baer?s loan recast is stuck with the promoters unwilling to furnish a personal guarantee and bankers not willing to accept the brand as collateral. Having learnt their lesson from the Kingfisher episode ? where bankers have recovered just a small fraction of their R7,000 crore loan ?bankers insist Moser Bear stick with the original agreement of providing a personal guarantee and are not ready to accept the brand as collateral.
Bankers want the then-promoter R. Puri, estimated to be valued at R100-200 crore, to provide a personal guarantee. ?A personal guarantee is a critical condition for CDR (corporate debt restructuring), mandated by the RBI, and if the company does not comply with it then the loans cannot be upgraded to standard,? said a banker, who did not want to be named.
However, the 39-year-old Puri resigned from the board of the company last November. ?Puri was the promoter when the company was getting admitted to the CDR cell and now he cannot wash his hands of by saying that he is no more the promoter,? another banker said. The Reserve Bank of India recently issued guidelines for restructuring loans, based on the recommendations of the Mahapatra committee, which say a personal guarantee is a must.
Bankers are also clear they will not accept a brand as collateral for the restructuring. Earlier this month, Moser Baer and it two units, which were admitted to the CDR cell last year, requested bankers to accept its brand as collateral quoting a valuation of R100 crore. The request was made as part of the restructuring of Moser Baer?s R2,000-crore debt currently under way. Moser Bear and its subsidiaries, Moser Baer Photovoltaic and Moser Baer Solar, received a clearance from the lenders for admission to the CDR cell in February 2012. State Bank of India, Central Bank of India, Punjab National Bank and Union Bank are among the lenders to the company.
Bankers, however, rejected the company?s proposal outright, citing the difficulties being faced with monetising the Kingfisher Airlines brand which had been pledged to banks as collateral against outstanding loans of nearly R7,000 crore. Banks that have been trying to recover funds from the now-grounded Kingfisher Airlines are at a loss on how to monetise the brand to recover dues with valuation diminishing and buyers hard to come by.
At the time the loan was granted to Kingfisher Airlines, the value of the brand was pegged at Rs 4,100 crore. In 2012, when SBI sought a revaluation of the brand through audit firm Grant Thornton, its value dipped by more than Rs 1,000 crore to Rs 3,000 crore. Now, senior professionals in the advertising and marketing field, who did not wish to be named, estimate that the value of the brand have diminished by anywhere between 70-80% over the past year due to the airline’s inability to restart operations.
This would mean that even if the consortium of 14 banks to Kingfisher Airlines were to try and sell the brand to recover their Rs 7,000 crore, they would recover less than Rs 1,000 crore by selling the brand, which would be a hit of over Rs 3,100 crore for the banks.
“For the lenders of Kingfisher, a valuation that is a year old is nothing more than a pipe dream. Considering that there has been no concrete action or communication from Kingfisher over the last 12 months, the current trust and resultant valuation of the brand is sure to have taken downward spiral,? said N Chandramouli, chief executive, Trust Research Advisory, which compiles an annual brand trust report that rates the most trusted brands in the country.
The CDR cell was formed in 2001 as both the RBI and the government felt the need for such a body to resolve cases of corporate financial sickness. Banks refer an account to the CDR cell to ensure that the loan is recovered properly from the borrower, even as he revives the business. This is often achieved by offering the borrower a moratorium on the repayment of dues, extending the repayment schedule, reducing the interest rates charged on the loan and by providing further funding for improving operating conditions.