BlackRock submits revival plan for ailing Rei Agro

In an unprecedented move, the world's largest investor BlackRock along with Credit Suisse and UBS have stepped in to revive the ailing Rei Agro, till recently the country's largest basmati player even as domestic lenders are trying to sell off the assets to recover their unpaid loans.

New York-based BlackRock with $4.6 trillion worth of assets under management has taken the lead by urging the domestic lenders of Rei Agro to reject the current Corrective Action Plan of the company. It has instead proposed a balance sheet restructuring plan to the lenders that takes into consideration the interest of domestic as well as overseas creditors, according to documents available with dna.

The proposed plan has been worked out by Houlihan Lokey Investment Banking Services on behalf of BlackRock and has been approved by Credit Suisse and UBS, the document said.

"Moreover, foreign lenders are also willing to provide additional funding so that Rei Agro, which is working with lakhs of Indian farmers, can revive its business," an official of the company said.

Troubles for Rei Agro started about a year back when it started defaulting on loans and the promoters, the Jhunjhunwala family, then had initiated a Corrective Action Plan - a nomenclature under Reserve Bank of India guidelines - following directives from its consortium of banks which formed a Joint Lenders Forum to implement it.

Amid lingering crisis in the company, what prompted this sudden interest from BlackRock and other foreign lenders?

While the Indian banking sector has exposure of Rs 5,680 crore worth of stressed loan with the company, foreign investors have a collective stake of Rs 1,800 crore.

BlackRock Investment Management has told the Joint Lenders' Forum in the letter that it is a major investor in Rei Agro, holding 80% of the aggregate $150 million or Rs 662 crore worth of 5.5% Foreign Currency Convertible Bonds and believes the current restructuring plan being implemented by the domestic lenders is unviable.

"We have spent a significant amount of time discussing with the company's domestic and international lenders as well as the promoters over the past eight months and believe that the company's proposed Corrective Action Plan is unviable. As a consequence, Houlihan Lockey and Avista Advisory, on behalf of BackRock, have put together a revised balance sheet restructuring proposal.

"The revised proposal was reviewed by BlackRock and all offshore subsidiaries' creditors (Credit Suisse Syndicate and UBS Syndicate) who collectively hold approximately $285 million (Rs 1,800 crore) in total outstanding debt," the letter by Houlihan Lokey Europe to UCO Bank, which heads the lenders' forum, said.

The revised proposal provides a "sustainable long-term capital structure allowing for increased operational flexibility and transfers majority ownership of the restructured company to existing creditors.

"On this basis, BlackRock and (Rei Agro's) offshore subsidiaries' creditors are willing to enter into a dialogue around a proposal as long as the promoters agrees to bring in capital as part of the deal and work with CDR lenders to finalise a restructuring proposal by March 31," the letter said.

Meanwhile, the domestic lenders are planning to dispose off the company's assets which would effectively put to rest any chances of revival.

Indian Overseas Bank has just given an ultimatum to Rei Argo asking it to pay within 2 months, failing which it would sell assets including the land and plant at Rewari in Haryana..

Apart from Indian Overseas Bank, which has an exposure of Rs 470 crore, UCO Bank (Rs 850 crore), Jammu and Kashmir Bank (Rs 650 crore), United Bank of India (Rs 215 crore) and Dena Bank (Rs 100 crore) are other domestic lenders to Rei Agro.