State-run Union Bank of India will likely sell its ₹2,077 crore KSK Mahanadi Power and ₹54 crore Raigarh Champa Rail Infrastructure debt to ASREC (India) Ltd, an asset reconstruction company, said three people aware of the development.
An offer of ₹828 crore for KSK Mahanadi and ₹38 crore for Raigarh Champa Rail by ASREC last week triggered a Swiss challenge auction, the people said. The Swiss challenge auction is scheduled on February 15.
ASREC is backed by Life Insurance Corporation (LIC) and three PSU banks-Indian Bank, Bank of India and Union Bank of India. Deutsche Bank has a small stake in the ARC.
The offer by ASREC for KSK Mahanadi equates to a recovery of 40 paise of a rupee on outstanding dues of Union Bank of India. In the case of Raigarh Champa Rail, Union Bank’s recovery would equate to 70 paise on a rupee loan. Raigarh Champa, an ancillary company of KSK Mahanadi, carries raw material to the plant. It is undergoing insolvency process separately.
ASREC did not respond to ET’s request for comments.
This is Union Bank’s second attempt to sell its KSK Mahanadi debt in this fiscal year. In August, the bank failed to sell its ₹2,077 crore debt, which was pegged at a reverse price of 44 paise on a rupee.
The proposed sale of KSK Mahanadi loans is within weeks of LIC selling its ₹613 core KSK Mahanadi debt to Rare ARC. An offer of ₹188 crore for the distressed power producer by Rare ARC had triggered a Swiss auction, as reported by ET on November 2. LIC concluded the sale on January 23 this year.
Last July, SBI sold ₹3,815 crore debt in the thermal power company for ₹1,622 crore, equating to a recovery of 42 paise on a rupee, as reported by ET on August 12.
In the last two years, Aditya Birla ARC has also acquired the thermal power producer’s loans from Punjab National Bank, Bank of Baroda and Axis Bank. It now controls 34% of the company’s loans, a critical level needed under the IBC since a resolution would not get approved if 34% of lenders voted against it.
The distressed thermal power producer, which operates three 600 MW units in Chhattisgarh, has been undergoing insolvency proceedings for nearly four years. The delay in resolution prompted lenders to exit by selling their exposures to ARCs.
Vedanta, Adani Power, Naveen Jindal’s Jindal Power, Dharampal Jindal’s Jindal Polymer, Power Finance Corporation and ILabs India Special Situation Fund are the applicants who submitted expressions of interest for acquiring the company.
However, a series of litigation delayed the resolution process. The National Company Law Appellate Tribunal (NCLAT) stayed the resolution process following a plea by ASREC that optimal recovery in KSK Mahanadi was possible only if it underwent group resolution.
Two ancillary companies-KSK Mahanadi Water, which operates a water pipeline to the power plant, and Raigarh Champa Rail-are undergoing insolvency proceedings.
Source: Economic Times