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DNA Money Exclusive: Gujarat NRE may be first to escape liquidation by repaying bankers fully

The promoter family of Jagatramka has promised to repay all of its Rs 3,501 crore of secured financial creditors fully through a mix of long-term debt and shares

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Arun Jagatramka
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Can a company get retained and revived by its promoter even after going through the Insolvency and Bankruptcy Code (IBC) process and then ending up as a liquidation candidate after failing to find any takers?

Arun Jagatramka, promoter of Gujarat Nre Coke, once country's leading metallurgical coal producer which had mines in Australia, need to wait for a month to know that.

In a break from tradition where out of 130 cases currently under advanced insolvency process, 100 have ended up in liquidation, or sale as parts and scraps, Gujarat NRE Coke is the lone one out, with its promoter earlier convincing the Kolkata bench of National Company Law Tribunal to provide a second chance to revive the company by promising a settlement scheme for its secured creditors, foreign currency bond holders and equity shareholders.

According to the scheme now finalised, the promoter family of Jagatramka has promised to repay all of its Rs 3,501 crore of secured financial creditors, full repayment through a mix of long term debt, converted equity shares and redeemable preference shares over a period and asked their consent to reverse the liquidation process that has already under process through a voting process to be held on July 16

"Substantial financial loss to lenders can be avoided as negligible value can be recovered by them when assets are sold as scrap brick by brick under the liquidation process. Lenders holding more than 33% shareholding in equity capital to benefit in case of revival of the company which would otherwise be nil in case of liquidation," Resolution professional Sumit Binani has said in his letter to shareholders.

As per the scheme, Rs 3,501 crore to be converted into Rs 500 crore of term loans to be repaid over 10 years at 8.1% interest rate, Rs 40 crore worth of shares of face value Re 1 and Rs 2,961 crore of Compulsory Redeemable Preference Shares of Rs 10,000 face value redeemable after 20 year at one go.

The unsecured creditors worth Rs 1,502 crore would suffer haircut of 50%, while the FCCB holders would see their investments reduced to 10%, or Rs 13.99 crore, converted into shares.

Like FCCB holders, the equity holders would see their face value of investment reduced by 90% from Rs 1657.03 crores to Rs 165.70 crores through reduction in the face value from Rs 10 a share to Re 1.

THE PROPOSED SCHEME

  • The promoter family of Jagatramka has promised to repay all of its Rs 3,501 crore of secured financial creditors fully through a mix of long-term debt and shares
     
  • The unsecured creditors worth Rs 1,502 crore would suffer haircut of 50%, while the FCCB holders would see their investments reduced to 10%, or Rs 13.99 crore, converted into shares
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