The lenders to debt-laden Reliance Capital (RCap) have expressed their inability to guarantee a “finality” of the insolvency process through the second e-auction as they would opt for further negotiations for value maximisation. This is likely to further delay the second e-auction, slated to be held on April 26.
RCap’s largest lenders, Life Insurance Corporation of India (LIC) and Employees’ Provident Fund Organisation (EPFO), have not agreed that the extended challenge mechanism (second e-auction) would be the final one. The Committee of Creditors (CoC) at its meeting on Thursday decided to “reserve their rights for further negotiations” in case the auction price is lower than the liquidation value, sources close to the development told FE.
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The lenders – LIC and EPFO – have a combined voting rights of 30% in the CoC and combined admitted claims of Rs 8,200 crore. The total admitted claims of RCap was at Rs 25,434 crore, and its liquidation value – assessed by two independent valuers RBSA and Duff & Phelps – was pegged at Rs 13,000 crore.
The bidders had sought to include a clause that the second e-auction would be the final one.
“The maximisation of value is a real concern, however, concluding the resolution process in a time-bound manner is also equally important. If this clause is not accepted by the CoC, there is a probability that bidders could back out, or there will be a subdued interest in the process,” one of the sources said.
The bidders’ suggestion for rejection of “toppling bids” (accepting bids outside the e-auction) was accepted by the CoC.
However, the CoC’s decision on other demands of the bidders could not be immediately ascertained.
These include a request on the “transparency” in the extended challenge mechanism such as information on the number of bidders participating in the round and value of their bids. Further, the CoC was “undecided” on requests that the e-auction would be held even if there was only one bidder in the race, and also on following a “zero date” payment policy shifting from the date of non-objection certificates, like in other insolvency cases.
According to the present zero date policy, the successful bidder gets 90 days from the day of National Company Law Tribunal’s (NCLT) approval, while the bidders want 90 days’ time to start from the date of receipt of non-objection certificates. Generally, lenders issue NOCs only after NCLT approvals are received.
The bidders’ request for changes in the terms of ‘force majeure’, which were the bone of contention between the lenders and bidders, was also yet to be decided.
The second round of e-auction (or the extended challenge mechanism) was postponed twice in the past due to myriad reasons, including legal tangles. The first round of auction was held on December 21, 2022.
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Two bidders – Singapore’s Oaktree Capital and IndusInd International Holdings (IIHL), the firm through which the Hinduja Group is bidding – had earlier confirmed their participation in the second e-auction. The CoC is expecting Torrent Investments, a group company through which the Gujarat-based Torrent Group, will also take part, sources said.
Earlier on April 12, RCap’s CoC received bankruptcy court’s approval to extend the deadline for completion of the resolution process to July 16 as it would be difficult to wind up the process within the stipulated time frame. The present deadline, which was extended multiple times, ends on April 16.