Reliance Power proposes settlement of Rs 1,200 crore to Vidarbha Inds lenders – EQ Mag
Anil Ambani-promoted Reliance Power has proposed a one-time settlement (OTS) of ₹1,200 crore to the lenders of Vidarbha Industries Power to settle its debt, said two sources aware of the development.
Reliance Power’s OTS offer is supported by global alternative investment firm Varde Partners, one source said.
In September 2022, Reliance Power entered into an indicative memorandum of understanding with Varde Partners for availing debt of up to ₹1,200 crore for the settlement and discharge and/or acquisition and restructuring of certain financial debt availed by Reliance Power. In June 2021, Varde Partners invested ₹550 crore in Reliance Infrastructure.
Varde has made investments in thermal power plants including KSK Mahanadi and RattanIndia Power since 2019.
As per the proposal, the company has offered to pay ₹1,200 crore to the lenders which includes Axis Bank, State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank and Bank of Maharashtra.
Vidarbha has obtained secured rupee and foreign currency term loans from banks and the outstanding loan was at ₹2,216.43 crore as of March 31, 2022, according to Reliance Power’s annual report. The company’s total borrowing including short-term and long term is ₹3,264 crore, according to a note by rating firm ICRA on February 1.
A Reliance Power spokesperson did not respond to a request for comment. Varde Partners could not be reached immediately for comment.
There are two other offers before the lenders and the joint lenders’ forum will meet soon to decide on the three proposals.
CFM Asset Reconstruction made an all-cash offer of ₹1,120 crore to the lenders.
NARCL had also made an offer of ₹1,150 crore to the lenders as reported by ET. NARCL has offered to pay 15% as upfront cash, while the balance will be paid over the next five years.
“All bids are unsolicited as lenders have not started the process,” said a lender. “Lenders have been meeting to discuss the two bids. Lenders will meet next week to discuss the settlement proposal and the two bids by CFM ARC and NARCL.”
Vidarbha Industries Power has been incurring losses over the last few years. Its plant has been non-operational since January 2019 and its power purchase agreement with Adani Electricity Mumbai was terminated on December 16, 2019, due to below-threshold availability in certain years.
The company had challenged the validity and legality of the termination letter, it has received unfavourable rulings from the Maharashtra Electricity Regulatory Commission and the Appellate Tribunal of Electricity and currently, the matter is pending with the Supreme Court, according to the ICRA report.
The lenders had initially entered into the inter-creditor agreement on July 6, 2019, to restructure the debt outside of the court. However, the debt wasn’t restructured under the framework and the agreement expired in January 2020.
After the expiry of the agreement, Axis Bank filed an application under the Insolvency and Bankruptcy Code for initiation of corporate insolvency, but the Supreme Court turned it down.
On July 12, 2022, the Supreme Court in a significant ruling said that while financial creditors have the right to initiate the corporate insolvency resolution process, NCLT has the discretion to admit or reject the application despite the existence of a default. In January 2023, the government proposed an amendment to the IBC to clarify that the NCLT must admit an application if there is a defined default.
Vidarbha Industries Power operates a domestic coal-based project with a capacity of 600 MW (2×300 MW) at the Butibori Industrial Area in Nagpur, Maharashtra.