Hold IBC action till Covid crisis is over: Videocon
Company will get better valuation, bankers told
The promoters of Videocon Industries (VIL) have asked banks to defer any further action on the company’s bankruptcy proceedings till the Covid-19 pandemic blows over and it gets better valuation.
Any hasty step will further dilute the valuation of the company with assets worth crores across India and overseas, VIL’S promoters told banks and the company’s debt resolution professional in a recent communication.
The promoters said the liquidation of Videocon Group companies would not only cause grave harm and prejudice to its stakeholders — whether they be financial creditors, operational creditors, or employees — but will also derail the entire insolvency process whose aim is value maximisation of assets.
Even before the decision to liquidate the group companies is taken, the committee of creditors must open all resolution plans received so far, said the promoters.
According to the earlier debt resolution proposal, banks will be able to recover up to ~27,500 crore of dues (as on November 2017) agreed to by the joint lenders’ forum (JLF) in November 2017 after the forensic auditors gave a clean chit to the company. But the Reserve Bank of India (RBI) decided to send the company to the National Company Law Tribunal (NCLT) for debt resolution within a month in December 2017.
According to an earlier plan by SBI Capital Markets (SBI Caps) for VIL, the company sought restructuring of its loans to be split into two: couponbearing debt of ~15,000 crore (55 per cent of principal) and non-coupon bearing of ~12,257 crore. Besides, ~4,032 crore of unpaid interest was also to be serviced as non-coupon bearing instrument.
Along with the long-term resolution plan, SBI Caps had also proposed to restructure its business by carving up the company into three verticals: Consumer electronics (Newco), residual business of VIL (oil and gas business), and an affordable housing company.
According to the plan, the entire demerger exercise was to get over by March 2019.
Of the ~15,000-crore interest-bearing loan, Newco was to take over ~10,000 crore of debt, ~1,500 crore of debt was to be serviced by selling real estate assets, and affordable housing projects were to shoulder the rest. On the non-coupon bearing debt, Newco was to hold ~7,500-crore debt as preference shares and surplus from oil and gas business was to be used to service the loans.
But before the JLF could vote on the proposal formally at its next meeting in early 2018, the RBI recommended the State Bank of India (SBI) send VIL to the NCLT under the newly formed Insolvency and Bankruptcy Code. This was despite SBI writing to the RBI that the company’s debt was set to get resolved. The SBI Caps offer is still on the table, clarified VIL promoters.