Mumbai: Lenders of Reliance Naval and Engineering Ltd. (RNEL), which is undergoing debt resolution process under IBC, are set to face a haircut of whopping 90 per cent to 95 per cent, if the resolution plan of either of the two resolution applicants is accepted by them.
The lenders are currently voting on the resolution plans of the two shortlisted resolution applicants, i.e., Hazel Mercantile-Swan Energy consortium and Navin Jindal led JSPL.
According to banking sources, the net present value (NPV) of the resolution plans submitted by both the shortlisted bidders is even less than the liquidation value of the company (RNEL) set by the resolution professional.
Hazel- Swan consortium has offered to pay Rs 2,040 crore, while JSPL’s bid is estimated around Rs 2,200 crore.
Hazel – Swan has offered an upfront cash payment of Rs 200 crore and the balance payment over a period of 5 years. On the other hand, JSPL offer includes an upfront cash payment of Rs 300 crore and balance amount to be paid over next 5 years. But, the JSPL plan also includes a payment of Rs 1,040 crore against the arbitration claims that the RNEL is fighting for. This payment will come to lenders only if arbitration claims are settled in favour of RNEL.
According to the source, the net present value of Hazel – Swan plan is estimated around Rs 1,200 crore and that of JSPL is around Rs 700 crore, which is less than the liquidation value of Rs 1,250 crore, set by the resolution professional of the RNEL.
The total debt admitted by the Resolution Professional of RNEL is Rs 12,400 crore. Hence, total recovery to the lenders under the Hazel- Swan plan is mere 9.8 per cent and JSPL plan is meagre 5.6 per cent.
The source quoted above said that the lenders are staring at a haircut of 90 per cent to 95 per cent, if either of the plans is accepted by them.
Currently, the process of voting on the resolution plans is underway. The voting started on February 25 and is likely to end around March 10.
Hazel Mercantile has set up a special purpose vehicle (SPV) in partnership with Swan Energy, owned by Mumbai based businessman Nikhil Merchant. Swan holds 74 per cent stake in the SPV that has put in a bid for RNEL.
According to media reports, Nikhil Merchant was also a director on the board of the Navi Mumbai Smart City Infrastructure Ltd., which has defaulted on bank loans and those loans have been classified as a non performing asset (NPA) by the banks.
Merchant resigned from the board of this defaulter company much after submitting the resolution plan for RNEL, raising questions over his compatibility under 29A of IBC.