Reliance Debt resolutions hit a bump as administrator and lenders try to resolve disputes

Bestinau got that-

Reliance Capital’s (RCap) debt settlement process has run into a hurdle with disagreements between the RBI-appointed administrator and the Creditors’ Committee over the sale of some of the profitable subsidiaries of the non-bank finance company.

Under the resolution plan, potential bidders have two options for acquiring RCap’s assets. They can either bid for all of Reliance Capital under option one or bid for several clusters or subsidiaries under the second option. As many as 55 entities including YES Bank, Piramal consortium, Adani Finserve, Brookfield, Bandhan Financial Holdings and Blackstone have expressed interest in acquiring the company. Nearly two dozen players have expressed interest in bidding on both options, with others only looking to bid on select clusters or subsidiaries such as Reliance General Insurance, Reliance Health Insurance, Reliance Nippon Life Insurance, and Reliance Asset Reconstruction and Reliance Securities. According to bank sources, disagreements had arisen between the Administrator and the Creditors’ Committee of Reliance Capital over the settlement process for the company’s subsidiaries.

According to a second source, differences had arisen over whether or not to invite price bids for individual clusters under the second option. Another concern was whether cluster-level bids under the second option could submit a plan that was compliant with the Insolvency and Bankruptcy Act.

“All subsidiaries or clusters are profitable entities and are well capitalized. So there is no requirement of turnaround as none of these entities are under stress and are well run businesses,” the source said.

According to the IBC, no conforming plan can be submitted under the second option as there is no requirement for a reversal.

“Under the circumstances, only the first option of RCAP-level plans can be considered and approved under the IBC,” noted the source.

As a result of this discrepancy, the Resolution Plan Request, which was to be issued by the Administrator on April 5, has been delayed.

Sources close to the resolution process said the issues are being discussed between the CoC and the administrator and the RFRP is now likely to be released in the second week of April. The RFRP document contains the guidelines for submission and evaluation of the resolution plan and must be agreed upon between the administrator and the CoC before it is published to all potential bidders.

“There have been discussions about the best way to monetize the assets. There were a few points that have been clarified and the modalities for the RFRP are now being discussed,” said a source close to development, adding that it will likely be released soon.

Consortium formation

According to the first source, CoC is fond of consortia for cluster-level bidders, but the Administrator may not be in favor of this. “Now the resolution can be passed for all of Reliance Capital, under both options,” the source said. If this happens, the number of bidders would drop significantly as those who only want to acquire specific subsidiaries might be left out of the race.

published on

Apr 10, 2022

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