After UK-based Liberty House has failed to make the upfront cash payment within the stipulated time for acquiring bankrupt Adhunik Metaliks (AML) under the Insolvency and Bankruptcy Code (IBC), lenders to the steelmaker are not opting for liquidation at this point of time as many companies have shown interests in buying the debt-ridden firm under the insolvency resolution process. In order to reach a preferred outcome, the lenders may negotiate with Maharashtra Seamless, the second highest bidder (H2), to resolve this case of corporate insolvency.
Last month the lenders had rejected an offer of Liberty House, a part of Sanjeev Gupta-led GFG Alliance, to pay an outstanding of around `410 crore in two installments by January 15. They had also turned down its condition that out of the total amount, it be allowed to deposit `100 crore — claimed by operational creditor MSTC — in an escrow account. The issue of state-run MSTC claiming around `100 crore is now pending for consideration before the National Company Law Appellate Tribunal (NCLAT).
Following this, lenders led by the State Bank of India held a couple of meetings to take stock of the situation. The lenders held its last meet on Wednesday.
“Nothing concrete has been decided in yesterday’s lenders meet. But we do not remain interested in going ahead with Liberty House. As the company, which is the successful resolution applicant, has failed to make the upfront payment to us, we may now negotiate with Maharashtra Seamless,” a source with direct knowledge of the development told FE on Thursday.
There were only two resolution applicants for the debt-ridden steel manufacturing company — Liberty House and Maharashtra Seamless of the DP Jindal Group. Liberty House was identified as the highest bidder (H1) by the creditors, while the plan of Maharashtra Seamless was rejected as it was offering less value than the liquidation value of the company.
“The lenders may negotiate with Maharashtra Seamless to increase its offer,” the person cited above said. Another source close to the matter said at this point of time the lenders would prefer resolution route rather than liquidation because they are interested in higher recovery of bad loans from this insolvency case.
“The lenders obviously would not like to go for liquidation immediately because it will not give them the realisation they are looking for. This case is very unusual, this is something which has never happened before,” the second person said on condition of anonymity.
“In case of liquidation banks will stand to lose. If resolution gives the lenders better outcomes, then they would obviously prefer that,” he added.
In a media statement issued on Thursday, Liberty House Group (LHG) said, “The Liberty Adhunik Metaliks deal is protected and secured since the matter is sub- judice and is being considered by the NCLT. Liberty House Group (LHG) is confident that NCLAT will resolve the Adhunik Metaliks MSTC matter, and it is committed and on track to implement its resolution plan to ensure the revival of the Adhunik Metaliks business.” MSTC issue is a matter outstanding in NCLAT, which would have a material bearing on present matter, the statement added.
Significantly, lenders have filed a petition at the Kolkata bench of the National Company Law Tribunal (NCLT) to invoke Section 74 of the Insolvency and Bankruptcy Code (IBC) against Liberty House for its failure to comply with the approved resolution plan for Adhunik Metaliks. Section 74 provides for stringent penalties for wilful non-implementation of approved resolution plan, including a jail term. The tribunal is yet to hear this petition.
Earlier, lenders to the bankrupt Amtek Auto had approached the Chandigarh bench of the NCLT, seeking invocation of Section 74 of the IBC against the UK-based company for its failure to comply with the approved resolution plan for the automotive component maker.
During the hearing at NCLT Kolkata bench, Liberty House made a representation to the tribunal to demonstrate the availability of “ready funds” to close the AML transaction. The NCLT also took note of some typographical corrections in the last order that were raised by creditors.The matter is listed for next hearing on January 24.
Notably, after hearing the arguments from the counsels for Liberty House and the creditors for AML on December 12, the Kolkata bench of the NCLT did not bar the lenders from going ahead with further course of actions it wants to take in this case.
“With the successful resolution applicant failing to pay within the stipulated timeline, we can negotiate with fresh bidders or all the other bidders which could not match up to Liberty House’s bid earlier,” Joy Saha, the counsel for creditors for AML, had said in his submission before the tribunal. “Many people have shown interests in buying the company under the Insolvency resolution process,” Saha had said.
Earlier aggrieved lenders had moved the Kolkata bench of NCLT after Liberty House had failed to make the upfront cash payment within the stipulated time for acquiring the steel company under the IBC. Following this, the international metals and industrial group had offered to pay `100 crore within 14 days and the balance `310 crore by January 15.
In his reply, Saha, the counsel for creditors, had said, “We are not agreeable to the conditions it (Liberty House) has been putting with the caveats.” Lenders to AML are SBI, Punjab National Bank, ICICI Bank, IFCI, Punjab & Sind Bank, UCO Bank, Allahabad Bank, Bank of Baroda, Corporation Bank and SREI Infrastructure Finance, among others.
Source: Financial Express, January 4,2019