While it is not clear how ABG was allowed to pile up loans of a staggering Rs 19,000 crore, the fact is lenders today are saddled with the highest stake in the firm of 49%.
Unwilling to settle for the sole offer made by Liberty House, lenders to ABG Shipyard have decided to try and attract more buyers in a second round of bidding. Consequently, prospective buyers can come up with resolution plans to revive the bankrupt shipbuilding firm. While the deadline for the completion of resolution process under the Insolvency and Bankruptcy Code, 2016, expires on April 28, the courts are expected to give lenders a grace period. A formal announcement to this effect as made on Wednesday by the resolution professional. The committee of creditors (CoC) is understood to have rejected the bid from Liberty House on the grounds that the price of Rs 2,200 crore offered is lower than the amount that can be recovered if the business is liquidated.
While it is not clear how ABG was allowed to pile up loans of a staggering Rs 19,000 crore, the fact is lenders today are saddled with the highest stake in the firm of 49%. The original promoters — led by chairman Rishi Agarwal — have little skin in the game with a shareholding of just 9%. At the end of March 2016, a shareholding of 33.26% was held by ABG International and other promoters. ABG’s net losses in 2016-17 were a whopping Rs 5,716 crore on minuscule revenues of Rs 16 crore.
Despite the lenders sanctioning a generous corporate debt restructuring package in March 2014, with a lower interest rate, lenient repayment terms with a two-year moratorium to boot, the management was unable to revive the company.
A strategic debt restructuring was proposed in August 2016, but did not go through because minority shareholders opposed it. The company owes ICICI Bank around Rs 5,303 crore, IDBI Bank Rs 2,573 crore and State Bank of India Rs 2,316 crore; the rest is owed to other lenders. This is the second time that Liberty House’s bid for ABG Shipyard has been turned down. A spokesperson for Liberty House — a London-based metals group — declined to comment on whether the company would submit another bid. The firm’s bid for Amtek Auto has been approved by the auto-parts maker’s CoC and it has also submitted a bid for Bhushan Power & Steel.