dependence capital: RBI’s insolvency decision against Reliance Capital could face hiccups
The lenders selected the preferred bidder almost six months ago, but the debt resolution of the two subsidiaries is still pending as the rules of the Securities and Exchange Board of India (Sebi) state that bondholders to 100% must approve a company’s resolution plan, unlike the trust deed signed by investors which expects only 75% to vote.
“This is a very special situation because the two loan subsidiaries, which owe the majority of the debt to creditors in the financial services of the Anil Ambani group, found a buyer before the start of the NCLT (National Company Law Tribunal) proceedings. . due to a regulatory conflict. The case is before the courts, and we have been waiting for a solution for months now, ”said one person closely involved in resolving these companies.
In June, Authum Investment & Infrastructure was declared the preferred bidder by lenders for the RHFL buyout, with 91% of creditors voting in favor. Authum offered 1,724 crore yen in cash and 300 crore yen in the form of 8% non-convertible debentures payable within one year to the company which owed creditors 11,200 yen under a agreement negotiated by BoB Capital Markets.
However, bondholders, who account for 41% of the debt, have yet to vote on the plan. IDBI Trusteeship, the principal trustee of bondholders, has so far not taken a vote as it awaits clarification on a Sebi rule, which was amended in September 2020 making 100% of the vote for bondholders. mandatory obligations for a resolution plan.
“The plan has so far only been approved by lenders who have signed the Intercreditor Agreement. Bondholders have yet to approve it as the trustees regulated by Sebi conform to its interpretation. ‘trust deed says 75% of the vote is enough, the trustees have so far disagreed, ”said a second person.
The situation is more complex at RCFL, which owed creditors over 9,000 crore. In July, Authum was again selected as the preferred bidder to take over the company with a bid of 1,240 crore yen, which meant an 86% write-off for creditors.
On October 28, the Bombay High Court, responding to a plea from the lenders, ordered Vistra ITCL, the administrator of RCFL’s bondholders, to call a bondholder meeting within 30 days to vote on the resolution plan, overriding Vistra’s claim that by following Sebi’s rules. Bondholders own over 90% of RCFL’s debt. The majority of bonds are held by banks and financial institutions.
Based on the ordinance, Vistra called a meeting of bondholders on December 8. However, this week, Sebi filed an opposition against the order, which is scheduled for hearing next Monday.
“This turns out to be a feud between the regulators. The RBI would like the lenders to go through the process, while Sebi wants the trustees to abide by the rules she imposes. One of them has to step back to s ‘Make sure the problem is solved because the resolution will take a back seat, “said a senior official at a bond trustee.
The RBI’s decision earlier this week to fire Reliance Capital to NCLT complicated the situation. Lenders hope the central bank doesn’t order a consolidated resolution of the three financial services companies, which will mean all the work done so far to find a buyer for RCFL and RHFL will be lost.
“Either Sebi lets the vote pass or the RBI consolidates all the debt. Otherwise, this impasse will continue. We can only hope that a solution is found quickly because it is an unnecessary delay for a process which already has a long way to go. delayed, “he said. the fiduciary officer.