Lenders to Reliance Naval and Engineering Ltd. (RNEL), which is in a debt settlement process under the IBC, are expected to face a haircut of 90% to 95%, if the resolution plan of one of the two candidates for resolution is accepted. by them.

Lenders are currently voting on the resolution plans of the two shortlisted resolution candidates, namely the 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 the two shortlisted bidders is even lower than the company’s liquidation value (RNEL) set by the resolution professional.

The Hazel-Swan consortium has offered to pay Rs 2,040 crore, while JSPL’s offer is estimated at around Rs 2,200 crore.

Hazel-Swan offered an initial cash payment of Rs 200 crore and balance payment over a period of 5 years. On the other hand, the JSPL offer includes an initial cash payment of Rs 300 crore and the balance amount to be paid over the next 5 years.

But, the JSPL plan also includes a payment of Rs 1,040 crore against the arbitration claims that RNEL is fighting for. This payment will only come to the lenders if the arbitration claims are settled in favor of RNEL.

According to the source, the net present value of the Hazel-Swan plan is estimated at around Rs 1,200 crore and that of JSPL is around Rs 700 crore, which is lower than the liquidation value of Rs 1,250 crore, set by the RNEL resolution professional. .

The total debt admitted by RNEL’s Resolution Professional is Rs 12,400 crore. Therefore, the total recovery for lenders under the Hazel-Swan plan is only 9.8% and the JSPL plan is only 5.6%.

The source quoted above said lenders are looking at a 90% to 95% discount, if either plan is accepted by them.

Currently, the resolution plan voting process is underway. Voting began February 25 and is expected 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 owns 74% of the capital of the SPV which made an offer for RNEL.

According to media reports, Nikhil Merchant was also a director on the board of Navi Mumbai Smart City Infrastructure Ltd., which defaulted on bank loans and these loans were classified as non-performing assets (NPA) by the banks.

Merchant resigned from the failing company’s board well after submitting RNEL’s resolution plan, raising questions about its compatibility under IBC Section 29A.

(With contributions from IANS)

Posted: Sunday 06 March 2022, 15:24 IST