Mumbai: Indian Bank is likely to launch a second Swiss challenge auction for the distressed Dharani Sugars and Chemicals account after a change in the deal structure for transferring the loan account to the National Asset Reconstruction Company (NARCL).
The change in the deal structure was necessitated after the government refused to recognise the proposal by the bad loan aggregator earlier because it had envisioned the creation of two trusts, one of which would exclusively deal with SBI’s claims, two people aware of the developments said.
The new proposed structure envisages the creation of a single trust which will house the security receipts (SRs) of the account. Unlike previously, SBI‘s priority charge on some recoveries from the accounts will now be adjusted from the overall recoveries from the SRs whenever they are redeemed, people familiar with the changes said.
“SBI will not get a separate trust for the priority charge they hold but from whatever recoveries happen, SBI will get a higher share since the bank has special charge on some anticipated cash flows of the company,” said one of the persons aware of the process.
Lead lender Indian Bank and NARCL did not reply to separate emails seeking comment till press time Wednesday.
The second Swiss auction comes almost six months after NARCL gave a binding offer of ₹222.5 crore in early March. This offer did not receive any counter in the Swiss challenge but the transfer to NARCL could not happen because of issues with the government guarantee and later due to the proposed structure which was not agreeable to the government.
Chennai-based Dharani Sugars owes lenders led by Indian Bank a total of ₹619 crore. Other lenders to the distressed sugar maker include SBI, Central Bank of India, ICICI Bank, Bank of India, IDBI Bank, Union Bank of India, South Indian Bank, Indian Overseas Bank and Federal Bank.
Bankers expect to launch the auction as early as next week. Bidders have to be given three weeks to submit a counter bid, in the absence of which the account will be transferred to NARCL.
