Mumbai: Edelweiss Asset Reconstruction Co. (ARC) Ltd is planning to file an insolvency case against Bharati Defence and Infrastructure Ltd in the National Company Law Tribunal (NCLT) to pre-empt winding-up petitions by unsecured creditors, said two people familiar with the matter, including a senior official at the ARC.
Edelweiss’s move is in response to the dissolution of the Board for Industrial and Financial Restructuring, which makes Bharati vulnerable to winding-up petitions from unsecured lenders.
“Under BIFR, a firm remains protected against any legal proceedings. After the introduction of NCLT, BIFR remains dissolved. As of now, no creditors to the firm have filed a winding-up plea, but we don’t want to take chances,” said the Edelweiss official cited earlier on condition of anonymity.
The ARC is currently creating a debt restructuring package that will be submitted to the credit committee once the insolvency case is admitted by NCLT. Under the Insolvency and Bankruptcy Code, once a restructuring plan is submitted to the credit panel (which consists of creditors other than those involved in the case), at least 75% of this panel needs to approve the plan. Then, insolvency professionals are appointed to oversee implementation of the package.
This is the second such case where lenders have taken recourse to the new bankruptcy law to deal with a stressed firm. Last month, ICICI Bank Ltd filed an insolvency case against Pune-based steel products maker Innoventive Industries Ltd. The next hearing in the case is on 16 January.
Edelweiss ARC had taken control of 75% debt of Bharati (formerly known as Bharati Shipyard) after banks sold their loans in June 2014. The asset reconstruction firm has been making efforts to revive the shipyard with an estimated debt of Rs8,500 crore. In May, Mint reported Bharati planned to hive off its Goa-based defence shipyard Pinky Shipyard Ltd and bring in an international defence shipyard as an equity partner.
Bharati’s troubles started after its 2010 acquisition of Great Offshore Ltd, a Mumbai-based offshore oilfield services provider, for over Rs700 crore. The acquisition pushed the firm deep into debt. According to the Edelweiss ARC official quoted above, efforts at turning around the firm still remain and the NCLT process is expected to help speed things up.
“This could be considered a positive step for companies that are honest about finding a resolution to their financial stress. For others who were just in BIFR for the legal protection, this law can prove to be a good motivator to go and effect some change. Else they run the risk of losing control of losing their company and possible liquidation” said a stressed asset professional, speaking on conditions of anonymity.