Dead end for Subhiksha’s debt restructuring plan

Dead end for Subhiksha’s debt restructuring plan
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First Published: Wed, Sep 02 2009. 09 23 PM IST

Feeling the pinch: A file photo of a Subhiksha store. Subhiksha shuttered its entire chain of around 1,600 stores across the country since January in the wake of a financial crunch. Harikrishna Katrag
Feeling the pinch: A file photo of a Subhiksha store. Subhiksha shuttered its entire chain of around 1,600 stores across the country since January in the wake of a financial crunch. Harikrishna Katrag
Updated: Wed, Sep 02 2009. 09 23 PM IST
New Delhi: The country’s corporate debt restructuring (CDR) mechanism office says the revival process of troubled retailer Subhiksha Trading Services Ltd has hit a dead-end with the consortium of banks owed money by the company being unable to submit the proposal on time.
“Subhiksha’s CDR is withdrawn and now the case is no longer with” this office, said A.B. Pewekar, deputy general manager of CDR and the officer in charge of the revival process of the retailer.
Feeling the pinch: A file photo of a Subhiksha store. Subhiksha shuttered its entire chain of around 1,600 stores across the country since January in the wake of a financial crunch. Harikrishna Katragadda / Mint.
Pewekar said the CDR office, responsible for facilitating defaulting borrowers and affected lenders work out a compromise that will help the companies restructure their debt and continue with their business, had given a three-month extension till 31 July to the banks working on the revival package.
They could not meet this deadline, he added.
The banks, including ICICI Bank Ltd, HDFC Bank Ltd and Bank of Baroda are owed around Rs750 crore by Subhiksha. They were originally supposed to file the revival package by the end of April but sought time till the end of July.
However, Pewekar said there is still a “window open” for the banks and they can make an appeal for a fresh CDR package. “A re-entry provision is there provided the package is viable,” he said.
R. Subramanian, Subhiksha’s managing director, said a fresh application for any CDR can be made if all parties involved agree.
“The banks and the company are clear that revival is in the best interest of all and is the only viable solution,” he wrote in an email. “The broad contours are agreed in principle though some details have to be ironed out on claims of some of the parties.”
He added that the CDR process binds only signatory banks and that while six of the 13 banks owed money by Subhiksha are signatories, all “except one bank” have been cooperating in arriving at a revival package.
The corporate debt restructuring mechanism is a voluntary non-statutory system, and guidelines governing it were laid down by the Reserve Bank of India in 2001.
The “one bank” referred to by Subramanian is Kotak Mahindra Bank Ltd. Last week, the Madras high court admitted two winding up petitions against Subhiksha by this bank and HCL Infosystems Ltd, a vendor owed money by the retailer. Kotak is owed around Rs40 crore by Subhiksha.
A senior executive at a bank that was signatory to the CDR process said the court’s move had weakened chances of a new CDR.
This executive, who didn’t want to be identified attributed the failure of the CDR process to Subhiksha’s non-cooperation with auditor Ernst and Young, the firm appointed by the consortium of banks to audit the beleaguered retailer’s books, for the banks’ inability to complete the revival process.
The executive added that his bank could approach the courts now. ICICI Bank, the lender at the vanguard of the CDR process, declined comment. Subhiksha shuttered its entire chain of around 1,600 stores since January in the wake of a financial crunch.
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First Published: Wed, Sep 02 2009. 09 23 PM IST