COCs ability to negotiate, commercial wisdom gets higher value for stakeholders

Chennai, Feb 19 (SocialNews.XYZ) The commercial wisdom of the Committee of Creditors (COC) and the ability to negotiate with the Resolution Applicant has resulted in maximisation of value for the stakeholders in the past.

Incidentally, maximisation of the value for the stakeholders is the ground on which the Insolvency and Bankruptcy Code (IBC) firmly rests.

There are several examples for the success of COC's commercial wisdom and the ability to renegotiate to get a better deal for the stakeholders of a corporate debtor.

For instance, in the case of DHFL that had a debt of Rs 88,000 crore, the first offer made by the Piramals to acquire was Rs 15,000 crore.

But after negotiations/revision/fresh plans the revised offer went up by Rs 22,250 crore to Rs 37,250 crore.

In respect of SREI debt (Rs 32,791 crore) resolution, the initial offer for the company was Rs 3,402 crore and National Asset Reconstruction Company Ltd (NARCL) while the value of resolution plan after negotiation/revision/considering fresh plans the amount went up by Rs 11,465 crore to Rs 14,867 crore.

Same is the case with couple of other corporate debt resolution plans:

Essar Power, the initial resolution plan value of ArcelorMittal was Rs 32,000 crore and was revised upwards by Rs 10,000 crore to Rs.42,000 crore.

Bhushan Power and Steel - debt Rs 48,719 crore; first round value was said to be Rs 15,000 crore and revised for about Rs 24,500 crore by JSW Steels;

Binani Cement - debt Rs 7,500 crore; initial resolution plan value was Rs 6,932 crore and later went up to Rs 7,950 crore by Ultratech Cement;

Bhushan Steel - debt Rs 59,207 crore; value of resolution plan after negotiation/revision/fresh plans Rs 35,200 crore plus 12 plus equity stake;

Videocon - debt Rs 64,938 crore; first round value about Rs 2,962 crore by Twinstar Technologies. After the CoC withdrew its approval of Twinstar's plan, three Expressions of Interest for the company have been received, as per reports.

Interestingly one more corporate case that is pending resolution is that of Reliance Capital with a debt of about Rs 25,500 crore.

The value of the resolution plan after the first round was about Rs 2,591 crore. The resolution value went up to Rs 9,000 crore that was made by the Hinduja group's IIHL.

In its appeal before the National Company Law Appellate Tribunal (NCLAT), IIHL has said it is batting for higher valuation for the stakeholders of Reliance Capital.

The IIHL said there is no bar on multiple rounds of challenge mechanism to arrive at a higher valuation for a company and the Adjudicating Authority has committed grave error of jurisdiction in interfering with the commercial decision of the COC which has found the offers/resolution plans as sub-optimal.

In its appeal, the IIHL said the Adjudicating Authority has glossed over the fact that Torrent is not a successful resolution applicant as the evaluation is at an intermediate stage where the COC is undertaking a price discovery exercise for maximisation of asset value.

Further the Adjudicating Authority failed to envisage that Torrent, as one of prospective resolution applicants, is merely a participant in the insolvency resolution process and would not have any locus to stall the resolution process, IIHL added in its petition.

Source: IANS