NCLAT stays Vedanta-led Twin Star Tech's takeover of Videocon Group under IBC

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The tribunal stayed the resolution plan after two dissenting creditors- Bank of Maharashtra and IFCI- raised concerns about the low value ascribed to the company.

NCLAT stays Vedanta-led Twin Star Tech's takeover of Videocon Group under IBC
The National Company Law Appellate Tribunal (NCLAT) on Monday stayed the implementation of the resolution plan for Videocon Group companies which was earlier approved by a lower court, based on an appeal by two dissenting creditors.
The tribunal stayed the resolution plan after two dissenting creditors- Bank of Maharashtra and IFCI- raised concerns about the low value ascribed to the company, and pointed out to the NCLT order to show a "breach of confidentiality clause with regard to the liquidation value", highlighting how the resolution plan value and liquidation value were "surprisingly very close."
The National Company Law Tribunal (NCLT) on June 8 had approved Vedanta Group’s Twin Star Technologies’ resolution plan for 13 Videocon Group companies under the Insolvency and Bankruptcy Code at close to the liquidation value.
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Twin Star’s plan entailed a repayment of only Rs 2,962.02 crore or 4.15 percent of the total admitted claim amount of Rs 64,838.63 crore, with the total haircut for creditors at 95.85 percent. According to the valuation reports of the company, the fair value of the group companies was Rs 4,069.95 crore, and the liquidation value was Rs 2,568.13 crore.
The resolution plan proposed to pay the assenting secured financial creditors Rs 2,779.05 crore against their admitted claims of Rs 56,215.66 crore, leading to a paltry 4.89 percent recovery. The secured dissenting financial creditors with Rs 2,306.63 crore of admitted claims were proposed to be paid Rs 105.23 crore, translating to a 4.56 percent recovery.
Of this, financial creditors would be paid only Rs 200 crore upfront, Rs 2,700 crore in the forms of NCD's (carrying a coupon of 6.65 percent), available cash balances, and 8 percent equity shares.
The assenting unsecured financial creditors were proposed to be paid Rs 15.72 crore against their admitted claims of Rs 2,523.63 crore (0.62 percent recovery), and dissenting unsecured financial creditors were to be paid nothing against their admitted claims of Rs 727.09 crore.
NCLAT has now stayed the implementation of the resolution plan for Videocon until the next hearing on September 7 and ordered the resolution professional to continue running the operations of the companies.
At the time of approving the resolution plan, NCLT had observed that the successful resolution applicant was "paying almost nothing" to acquire the companies.
Further, it is also observed that by just paying only Rs. 262 crore (8.84 percent of total plan value) (Cash balance available with the corporate debtors is approximately Rs 200 crore), the successful resolution applicant will get possession of all the 13 corporate debtors to run these units and the first payment of Rs 200 crore as part redemption amount of NCDs will be paid within 25 months from the closing date and the balance amount of RS. 6,25,00,00,000/- each is spread over in four installments starting from the 3rd year onwards up to the sixth year from the closing date and the interest rate for the NCDs is also a nominal of only 6.65 % P.A. payable annually. It may also be noted that at the time of granting loan, restructuring, approving the resolution plan with such a huge hair cut also the financial institutions, the committee of creditors consisting of 35 members exercised their commercial wisdom. Since this is the commercial Wisdom of the COC and as per the various judgments of the Supreme Court and by following the judicial precedents, discipline the Adjudicating Authority approves the resolution plan of the successful resolution applicant with a suggestion," NCLT had said.
The 13 Videocon group companies include Videocon Industries, Videocon Telecommunications, Electroworld Digital Solutions, Value Industries, Evans Fraser & Co, CE India, Millennium Appliances (India), SKY Appliances, PE Electronics, Techno Electronics, Applicomp India, Techno Kart India and Century Appliances.
SBI, IDBI Bank, Union Bank of India, Central Bank of India, Bank of Baroda, ICICI Bank, PNB, Indian Bank, EXIM Bank, Bank of India, Canara Bank, IOB are among key lenders to the Videocon Group.

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