Essel Group's deal with US-based Invesco Oppenheimer Developing Markets Fund is a straight equity transaction and does not include a right of first refusal or return guaranteed or buyback conditions, said Punit Goenka, MD and CEO of Zee Entertainment Enterprises Ltd.
In a significant transaction to solve the debt woes, Essel Group has sold an 11 percent stake in Zee Entertainment to Oppenheimer for over Rs 4,224 crore.
“It is a straight equity transaction. They will buy this stock from us once the escrow mechanism has been set up with the lenders," said Goenka.
The deal has increased Oppenheimer's total holdings in Zee Entertainment to 18 percent. When asked if Oppenheimer will be given any rights or a board seat with this investment, Goenka said, “No, nothing. It is a pure equity transaction and they don’t have any rights with this.”
Goenka said he expects a large part of the proceeds to come in hands for the debt repayment as the taxes are going to be minimal on the deal. “The tax leakage in this is going to be minimal because we have been working with our tax advisers ever since we announced the intention of doing the stake sale," he added.
"The timeline for this will be a matter of a week and within the month of August, the money should be received,” he said.
In terms of utilisation of proceeds, Goenka said the 100 percent of the funds will go to debt repayments and the company will be having formal meetings with lenders starting tomorrow regarding the distribution of funds.
"From our perspective, we would like it to be equitable based on the ratio of the pledge of Zee shares that each one of them hold whether it is a mutual fund (MF) or a non-banking financial company (NBFC) but we are yet to hear from them as to how they want us to treat it," said Goenka.
“Our proposal to the lenders will be pro rata, which means in proportion of the Zee shares that are pledged with them because at the end, this stake sale is happening from Zee share sale and the shares that we recover from them have to be handed over to the Invesco Oppenheimer,” he further mentioned.
Speaking about taking care of other MFs, other lenders who have given loan against shares (LAS) of some of the other group companies, he said, “The 11,000 crore covers all of the pledges. It is not just Zee pledge, it covers the pledges of the other listed companies of the group as well. So once we address the Rs 11,000 crore, in tranche II everybody will be taken out.”
On selling Zee Entertainment at this point for any debt resolution, he said, “I don’t think we will need to sell the crown jewel, Zee Entertainment, anymore given that we have managed to establish our intent very clearly. Having said that, I think my team will be geared up to maximise the return we can get from the non-media assets. That should help us retain the business internally.”