All three suitors for Altico Capital — SSG Capital, Cerberus Capital Management and the incumbent management team — have revised their offers further, as lenders to the cash-strapped home financier drive a hard bargain that may see them recover at least 67% of the total dues upfront, said people in the know.
The three submitted their latest offers on Friday after lenders had met last Monday to consider the earlier proposals. A key issue is whether to wind down Altico or keep it as a ‘going concern’. Creditors and bidders are slated to meet Monday.
The revised proposal by Hong Kong-based SSG offers two options. The first includes complete cash and equity offer similar to that of Cerberus. The second is comparable to the previous offer by SSG that included Rs 2,150 crore of the upfront payment plus Rs 1,500-1,750 crore of security receipts. SSG has also suggested that the bad loans of Altico be moved to an asset reconstruction company chosen by the lenders.
All Eyes on Resolution
Altico, then, will continue as a much smaller organisation with a shrunken book. The employees are likely to be absorbed as the company will be repositioned as a lendercum-advisory firm.
Cerberus has raised its offer a third time, keeping the broad structure intact — the new offer includes around Rs 2,600 crore cash and Rs 450 crore of security receipts payable when possible, along with an equity infusion of Rs 1,000 crore to complete projects. The shareholder resolution offer is similar to the last one but some equity commitment has been added as a sweetener.
The Clearwater-backed Altico management had suggested 100% repayment of the principal amount with outstanding interest being paid back at 10% over 5.75 years. But this hinged on Clearwater taking control of Altico as part of the resolution process. In this formula, the existing shareholders will agree to pay Rs 630 crore by March 2021, which will be counted as year one. In years two and five, the management will make fresh equity infusions to keep the business viable, said people briefed on the matter. Alternatively, the shareholders have suggested that some lenders could get repaid before 5.75 years but only if they agree to a 30% haircut. They will get 70 cents to the dollar at the same coupon.
“The credit committee is meeting on Monday along with the bidders, who will again present a detailed resolution plan,” said an executive. “An informal show of hands is also expected after the meeting. By March 20, a final resolution is expected after a final vote.” That vote is expected to be held on March 12. SBI Capital and EY, advisers to the lenders, will analyse the bids.
SSG, Cerberus and Altico declined to comment. SBI Caps didn’t respond to queries.
Crisis & Opportunity
The creditor-run recast is being keenly tracked for an indication on how the country’s shadow banking crisis will be resolved and the opportunity this presents for hedge funds, structured debt and distressed asset investors. The real estate lender faced a liquidity crunch in September and defaulted on Rs 138 crore of debt repayments.
Lenders are struggling to realise a higher value in other big cases, including Dewan Housing Finance Corporation Ltd and Infrastructure Leasing & Financial Services, as they have stopped their core business activities.
“It is important to keep any entity as a ‘going concern’, which is why lenders are insisting on it for Altico,” said an executive involved in the process.
Source: Economic Times