Euromoney, June 21 2021
The Insolvency and Bankruptcy Code was supposed to provide swift and meaningful resolution to help get state-owned Indian banks back on their feet. Does a 95% haircut with questions around confidentiality achieve that?
State Bank of India, 18.05%: Voted for.
IDBI Bank, 16.06%: Voted for.
Union Bank of India + Corporation Bank + Andhra Bank, 9.07%: Voted for.
These lines come from a judgment in the National Company Law Tribunal, Mumbai Bench, under India’s Insolvency and Bankruptcy Code, and they refer to the resolution of a failed company called Videocon Industries.
The list goes on through 35 creditors; a few dissent (Bank of Maharashtra, IFCI, a couple more) and most of the tinier creditors abstain.
But, by and large, it’s a resounding ‘yes’: the top 14 creditors, with more than 95% of the voting share between them, vote in favour.
What have they agreed to? A haircut of more than 95%.
The buyer of Videocon and a clutch of merged businesses within it is Anil Agarwal’s Twin Star Technologies, linked to the Vedanta Group, and he will be paying Rs29.62 billion ($400 million), compared with admitted claims by the creditors of Rs648.38 billion.
And that’s the assenting, secured, financial creditors.
Unsecured financial creditors will get a 0.62% recovery – provided they voted for the plan. Unsecured creditors who dissented will get nothing at all. Operational creditors, mostly small to medium-sized enterprises, get 0.72%.
Even the tribunal itself said in its judgment that the successful bidder was “paying almost nothing”.
Getting to this point has taken three years since State Bank of India, the biggest creditor, took the company to the NCLT after Videocon, founded by the Dhoot family of industrialists, defaulted on its loans.
So why would the lending banks vote for such a terrible deal? Because it’s the best one they’re going to get.
Full article here