The lenders and bidders of debt-laden Reliance Capital (RCap) have objected to Life Insurance Corporation’s plans to sell bond investments worth Rs 3,400 crore in the former Anil Ambani group company, alleging ‘conflict of interest’.
The insurer is in the final stages of selling the bonds to Assets Care & Reconstruction Enterprise (ACRE), an asset reconstruction company (ARC) backed by Ares SSG Capital.
RCap lenders allege that LIC has initiated a parallel process to sell the bonds as the deadline to submit the binding bids ends on November 28. According to sources, the insurance behemoth’s timing and pricing of the bonds are the causes of concern.
LIC has initiated a Swiss Challenge process to invite bids from ARCs, with November 25 as the last date. Prior to starting the process, it had received a binding bid from ACRE, with the ARC offering 27 cents for each dollar. This would result in a 73% haircut for the insurer, sources close to the development said.
Also Read: LIC’s move to sell Reliance Capital’s debt to ARC upsets lenders, bidders
RCap had offered two options to all the bidders. Under the first option, companies could bid for Reliance Capital, including its eight subsidiaries. The second option gave the bidders the freedom to bid for the subsidiaries individually or in a combination. It has put eight businesses on the block. These include general insurance, life insurance, health insurance, securities business and asset reconstruction, among others.
According to a lender, ACRE would not be compliant with Unpublished Price Sensitive Information (UPSI), as per the Sebi regulations.
Further, while the prospective bidders would be asked to better the offer made by ACRE, the ARC will have the first right to match the counter offer. Now with the deadline to submit the binding bids for RCap ending on November 28, the Swiss Challenge process has been initiated a bit late into the resolution process and is “too short”, the lenders said.
LIC is a member of the committee of creditors (CoC) of RCap and the attempt is to finalise a transaction three days before the binding bids are to be submitted. “This conflicts with the timing of submitting the binding bids,” a lender said, adding that they will raise the issue in the next CoC meeting.
As per the IBC law, the CoC will receive the independent valuation of Duff & Phelps and RBSA on November 29 (the next day of the submission of binding bids), which will be available to all CoC members. So, it is apparent that ACRE and LIC are trying to close a deal before the submission of the binding bids and before the valuation is available, they alleged.