Lehman buys Spectrum Power for Rs 400 cr
Global investment bank Lehman Brothers has acquired controlling stake in Spectrum Power Generation (SPGL) after asset reconstruction firm Arcil auctioned the company’s loans under the debt recovery law, report Sangita Mehta & Nevin John in Mumbai.
Arcil acquired 77% of the company’s debt from leading banks like State Bank of India, ICICI Bank, IDBI and others. Lehman Brothers won the bid over Deutsche Bank and Ganta Infrastructure – a firm controlled by M Kishan Rao, a promoter of SPGL. When contacted, senior officials of Arcil and SPGL refused to comment on the matter.
Under the restructuring proposal submitted by Lehman Brothers, almost the entire equity of the company will be written off against bad debts and a fresh capital of Rs 1,400 crore will be infused.
A part of the Rs 1,100 crore debt will be written off, a part would be converted into equity and some of it will be paid off in cash. Sources said existing lenders will receive Rs 400 crore in cash in two instalments (first, a sum of Rs 50 crore and rest to be paid later) and a part of the debt will be converted into 10% equity. Assets of SPGL were pledged with the lenders who sold the debt to Arcil, which in turn, sold SPGL debt to Lehman Brothers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SRAFESI) Act.
However, the promoters of SPGL have moved the Hyderabad high court, challenging Arcil’s approach in dealing with the restructuring of the company. The promoters alleged that Arcil has not considered their restructuring proposal before calling for prospective bids. The promoters are particularly upset that Lehman’s proposal entails a significant reduction in the promoters’ equity stake. The case will come up for hearing on December 7.
Sources said Lehman’s proposal of restructuring of the debt in four years has gone in its favour. The SPGL package involved repaying debt holders over a span of 10 years. Lehman has also proposed to expand the capacity of the power plant from 208 MW to 550 MW. SPGL was jointly promoted by AV Mohan Rao’s Spectrum Technologies and M Kishan Rao’s Bambino group. However, a rift between the two promoters and series of court cases between the two on the projects affected the company. To salvage their money, key lenders converted their debt into equity, thereby gaining a controlling stake in the company. Few years ago IDBI, the key lender, tried running the company by putting in place its own management team. However, this effort could not be sustained.
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