Lenders of bankrupt Sintex Industries will decide next week on whether to restart the resolution process or to put to vote the four plans that they have received, said two people aware about the development. The decision will be crucial considering that all four plans are below the liquidation value.
Lenders are in a dilemma since restarting the process could not only delay the resolution but there could be uncertainty if bidders would make better offers, one of the persons cited said.
At the same time, if all four plans are put to vote, a majority could vote against all four plans, the same person said. This is because conventionally the dissenting creditor’s allocation is linked to the liquidation value, while the assenting creditor’s allocation is linked to the winning bidders offer.
In the second round of bidding, a joint offer by Reliance Industries-Assets Care and Reconstruction Enterprises (ACRE) was the highest bidder at ₹3,405 crore followed by Himatsingka Ventures at ₹3,297 crore, as reported on February 16. The other two bidders are Welspun promoted Easygo and GHCL offering ₹3,102 crore and ₹2,140 crore respectively. In the first round, the Reliance-ACRE team made the highest offer of ₹2,363 crore which was much lower than the liquidation value.
In a series of meetings held last week, the core committee of creditors contemplated on the distribution of proceeds and on ways to get improved offers.
On getting improved offers, some lenders suggested a Swiss challenge auction wherein the highest bidder’s offer will be the anchor bid.
Under the Swiss auction, the Reliance-Acre team will have the first right to match any counter offers. The other option lenders considered was to reinvite bids in hope of getting improved offers. ACRE is an asset reconstruction company backed by Ares SSG Capital.
On the distribution of proceeds, the core group of leaders decided that sharing of proceeds will be linked to the security held by each lender. A non-conventional approach on the distribution of proceeds is proposed to discourage lenders from voting against a plan, in case all plans are put for vote, the lender cited above said.
Of the Rs 3405 crore offered jointly by the Reliance-ACRE team, lenders would receive Rs 2700 crore as upfront payment and Rs 171 crore debt would be converted into 15% equity. This would equate to a recovery of 36% excluding the 15% equity.
The RP has admitted Rs 7,534.6 crore of claims from 27 financial creditors.
