Dismissing the allegations raised by the consortium of Varde Partners and Arena Investors about the challenge mechanism process for inviting fresh plans from eligible resolution applicants for two Srei companies, the administrator of two companies has shot off a letter to the consortium, asserting that its revised plan submitted after the completion of the process is ‘non-compliant’ as it did not follow the rules of request for resolution plan (RFRP), sources close to the development told FE.
The Varde-Arena consortium wrote a letter to the administrator, Rajneesh Sharma, on Thursday, alleging that the challenge mechanism process for inviting fresh plans from eligible resolution applicants for insolvent Srei Infrastructure Finance (SIFL) and Srei Equipment Finance (SEFL) was carried out at a “short notice”. The consortium also submitted a revised bid, increasing the upfront cash amount to Rs 3,600 crore.
The consortium, which had been in the fray from the beginning of the corporate insolvency resolution process (CIRP), dropped out at the end of the second round of the five-round challenge mechanism process on Tuesday. The consortium’s financial bid in terms of net present value (NPV) stood at Rs 4,687 crore, including around Rs 3,250-crore upfront cash amount.
After the challenge mechanism process ended, state-backed NARCL’s offer of Rs 5,555 crore in NPV terms, which includes upfront cash of Rs 3,180 crore, was found to be the highest. Authum Investment and Infrastructure’s bid of Rs 5,526 crore, in NPV terms, was adjudged the second-highest.
After submitting the revised bid, days after the close of the challenge mechanism process, the consortium claimed to have emerged as the highest resolution applicant with a total amount of Rs 14,000 crore, including bonds, optionally convertible debentures (OCDs), equity, and upfront cash. In the letter, written to the administrator, the consortium, also blamed the administrator for rushing the entire “challenge process in an unreasonable manner” as it was carried out in an extremely short timeline of one week without any consideration of prior requests for adequate time.
“The administrator has written a letter to the consortium of Varde Partners and Arena Investors, and dismissed all its allegations. The consortium had participated in challenge mechanism up to the second round. In the first round, it had asked for additional one-hour time which the CoC (committee of creditors) had granted. After the second round, it never informed the CoC or the administrator that it would not going to participate in the next round. They escaped from the challenge mechanism. After seeing the highest value of the plan after finalisation of challenge mechanism, the consortium has submitted a revised resolution plan, which is in violation of RFRP rules,” the sources cited above said.
Notably, the CoC decided to adopt the challenge mechanism as in the revised plans submitted by the three bidders earlier, the upfront cash component remained below Rs 3,000 crore. The creditors, thus, decided that Rs 3,000 crore would be considered as the minimum threshold value of the financial proposals towards the upfront cash payment for the eligible resolution applicants for participating in the challenge process. Emails sent to Srei administrator Rajneesh Sharma and Värde went unanswered till the time of going to the press.
In the challenge mechanism process, there were two parameters – upfront cash component and net present value (NPV) of committed deferred payments by way of different financial instruments offered by prospective resolution applicants in their submitted financial proposals.