SBI to auction Rs 2200 crore loan to Bombay Rayon, bidding on August 20

The State Bank of India has invited bids from asset reconstruction companies to offload loan of Rs 2,200 crore given to Bombay Rayon Fashions after the apparel maker defaulted on repayments. The state-run bank, the largest lender in the country, has kept a reserve price of Rs 900 crore, which is about 40% of the total loan.Banks have an exposure of nearly Rs 6,000 crore to the Mumbai-based company, which could be dragged to the bankruptcy court if a resolution plan is not in place before the end of August.As of June, lenders jointly hold 55% stake in the company, with the State Bank of India having the highest equity stake of 29%, followed by Axis Bank at 8%. Among others, the Union Bank of India holds 3.3% while other banks with marginal stakes include the Bank of India, Punjab National Bank, Central Bank of India and Allahabad Bank. The promoters, the Agarwal family, have a 38.3% stake in the company.The lenders made several attempts to revive the company by proposing restructuring of its debt. Earlier the banks had converted part of their debt into equity when the company’s loan was restructured under the corporate debt restructuring scheme.As of March 2017, lenders held 28% stake on converting close to Rs 800 crore of debt into equity. The next month they decided to implement the Scheme for Sustainable Restructuring of Stressed Asset or S4A wherein they raised their stake to 55% on converting unsustainable debt into equity. However the debt recast did not materialise.On February 12, the Reserve Bank of India withdrew all the debt restructuring schemes such as S4A and strategic debt restructuring scheme while asking lenders to resolve stressed loans under these schemes by August end, failing which they would have to refer the borrowers to the bankruptcy court. Two apparel and fashion brands – Reid & Taylor and Provogue – are already facing bankruptcy proceedings.The auction is due on August 20 and the State Bank of India has said that it is willing to accept a combination of security receipts and cash in exchange of the loan. The bank has said that it has collaterals of Rs 190.8 crore.

from The Economic Times https://ift.tt/2vq5zOS