Lenders have agreed to a resolution plan submitted by Mumbai non banking finance company (NBFC) Finquest Financial Solutions to take over the Kolkata based SK Birla group owned bankrupt textile company Digjam Ltd at a haircut of 40% of total dues. Two banks namely, UCO and State Bank of India (SBI) will receive a full amount of their admitted claims in a rare instance for banks in the new law, according to a person directly involved in the negotiations.
Digjam, a well-known suiting brand of yesteryears, was dragged to the bankruptcy court by an operational creditor called Oman Inc for claims worth Rs 21.74 lakh in 2018. The Ahmedabad bench of the national company law tribunal (NCLT) admitted the petition in April 2019 following which corporate insolvency resolution process (CIRP) was initiated.
Total dues that Digjam owed its creditors came to about Rs 168 crore. This included bank loans, inter corporate loans and unpaid dues to employees and suppliers. Finquest had offered to pay off Rs 100 crore of the dues including bank loans and other dues beating an offer from another textile company, Donear Industries, one person directly involved in the negotiations said.
“Out of the Rs 100 crore offered by Finquest, Rs 71 crore will be paid to the two banks, Rs 12 crore will go into costs for the CIRP process, employees will get Rs 6 crore and the rest of the money will be given to operational creditors,” this person said.
UCO Bank was the lead lender for the company with loans of Rs 59 crore while SBI had loans outstanding of Rs 12 crore. Both banks voted in favour of the proposal. Mumbai based Finquest which is also in the business of buying distressed debt hopes to start operations of the company which has stopped production for the last 18 months.
“There are 500 employees and workers in the company and their dues have also been taken care of in the process. The plan is to start production and revive the company after we get the final approval from the NCLT,” said this person. Resolution professional Sunil Kumar Agarwal will now approach the NCLT for its approval.
Digjam has been facing troubles in the last couple of years. In October 2018, it announced the closure of its Jamnagar mill due to “extremely tight liquidity and working capital position”. The company’s stock ended at Rs 0.85 a piece without a single trade on Thursday.
Source: The Economic Times, February 14,2020