Banks led by Indian Overseas Bank (IOB) have given the go-ahead to transfer the Rs 873 crore debt of Chennai-based Rainbow Papers to Rare Asset Reconstruction Company (Rare ARC) for Rs 160 crore or an 18% recovery, more than three months after it had beaten the government-backed National Asset Reconstruction Co’s (NARCL) offer of Rs 110 crore.
Bank of India (BoI) was the last bank to give its consent for the transfer of the debt to Rare late last month, following which the process for the transfer of the debt has been initiated, three people familiar with the development said.
Lead lender IOB did not reply to an email seeking comment.
“With BoI having given its consent all six lenders have now agreed to transfer the debt. Rare has to now arrange for the bank guarantee to back the security receipts issued by it, following which the documentation will be initiated,” said a person familiar with the process.
Besides IOB and BoI, the other lenders in the consortium are Punjab National Bank, Union Bank of India, Bank of Baroda and Indian Bank.
Rare ARC has committed to give a bank guarantee backstopping the 85% security receipts (SRs) issued by the company amounting to Rs 136 crore.
Rainbow Papers manufactures paper and paper products primarily used for industrial, packaging and stationery. It was among the first accounts which was on the radar of the NARCL last year. The government-backed bad bank had given an initial offer of Rs 80 crore in July last year, which was later increased to Rs 110 crore after banks refused the low offer.
Subsequently, Rare ARC jumped in the fray offering Rs 160 crore which includes Rs 24 crore in cash and the result through SRs to be redeemed later, which is backed by a bank guarantee. Banks’ approval for Rare’s offer means that the transaction is now at the final stage, awaiting completion of documentation.