It would be the largest sale of distressed loans on an upfront basis by a bank, equivalent to a 42% recovery for the bank. Aditya Birla ARC’s bid was backed by its joint venture partner, Varde Partners.
Until now, most big-ticket distressed loan sales have been structured deals involving partial payment in the form of security receipts that would be refunded upon collection from defaulting borrowers.
Aditya Birla ARC did not respond to request for comment.
SBI’s decision to sell KSK Mahanadi’s loans is an example of the extent to which banks are willing to avoid the uncertainty of the resolution process based on the Insolvency and Bankruptcy Code (IBC). The company has been in insolvency proceedings for more than two and a half years.
Naveen Jindal’s Jindal Power, Dharampal Jindal’s Jindal Polymer and iLabs India Special Situation Fund were among the candidates who expressed interest in acquiring it.
However, a series of disputes delayed the resolution process. The National Company Law Appellate Tribunal (NCLAT) has suspended the resolution process following a plea by ASREC, a CRA and a lender that optimal recovery at KSK Mahanadi is only possible if it is the subject of a group resolution. Two ancillary companies – KSK Mahanadi Water, which operates a water pipeline to the power plant, and Raigarh Champa Rail, which transports raw materials to the plant – are subject to separate insolvency proceedings. The NCLAT scheduled the case for hearing on August 22.
Aditya Birla ARC had bid ₹1,544 crore for SBI at an undisputed Swiss auction organized by the bank in June. “Despite no other counter bids, SBI hesitated to declare Aditya Birla ARC as the winning bidder,” said one of the people quoted above. “Instead, the bank sued ARC to improve the offer,” the same person said.
After a series of negotiations between the bank and ARC over pricing, the deal was reached on Friday, the sources said.