INSUBCONTINENT EXCLUSIVE:
The State Bank of India has invited bids from asset reconstruction companies to offload a loan of Rs 2,200 crore given to Bombay Rayon
Fashions after the apparel maker defaulted on repayments
The state-run bank, the largest lender in the country, has kept a reserve price of Rs 900 crore, about 40 per cent of the total loan.
Banks
have an exposure of nearly Rs 6,000 crore to the Mumbai-based company, which could be dragged to the bankruptcy court if a resolution plan
is not in place before August end.
As of June, lenders jointly hold 55 per cent stake in the company, with the State Bank of India having
the highest equity stake of 29 per cent, followed by Axis Bank at around 8 per cent.
Among others, the Union Bank of India holds 3.3 per
cent while other banks with marginal stakes include the Bank of India, Punjab National Bank, Central Bank of India and Allahabad Bank
The promoters, the Agarwal family, have a 38.3 per cent stake in the company.
The lenders made several attempts to revive the company by
proposing debt restructuring
Earlier, the banks had converted part of their debt into equity when the company’s loan was restructured under the corporate debt
restructuring scheme.
As of March 2017, lenders held 28 per cent stake on converting close to Rs 800 crore of debt into equity
The next month they decided to implement the Scheme for Sustainable Restructuring of Stressed Asset or S4A wherein they raised their stake
to 55 per cent on converting unsustainable debt into equity
However, the debt recast did not materialise.
On February 12, the Reserve Bank of India withdrew all the debt restructuring schemes such as
S4A and strategic debt restructuring scheme while asking lenders to resolve stressed loans under these schemes by August end, failing which
they would have to refer the borrowers to the bankruptcy court.
Two apparel and fashion brands – Reid Taylor and Provogue – are already
facing bankruptcy proceedings.
The auction is due on August 20 and the State Bank of India has said that it is willing to accept a
combination of security receipts and cash in exchange of the loan.
The bank has said that it has collaterals of Rs 190.8 crore.
