Mumbai: A consortium of lenders, led by the State Bank of India (SBI), has sought expressions of interest (EoIs) from companies to monetize the upstream—or exploration and production—assets of VOVL, formerly known as Videocon Oil Ventures Ltd, in Brazil, Indonesia and East Timor.
The consortium of 17 banks—including Bank of India, Export-Import (Exim) Bank of India, Central Bank of India, IDBI Bank, ICICI Bank and Union Bank of India—plans to realize at least 50-55%, or $2.5-3 billion, of the total loan value of $4.5 billion that had been lent to VOVL, said two bankers aware of the development.
SBI along with other banks had advanced credit facilities to VOVL and its offshore subsidiary IBV Brasil Petroleo Ltd.
“SBICAP (SBI Capital Markets) has been appointed as process adviser by a consortium of lenders led by State Bank of India, to identify firms having adequate capability for undertaking the monetisation of upstream oil and gas assets located in South America and South East Asia of offshore subsidiaries of an Indian Company," SBICAP said in a notification on its website.
Videocon’s Brazil block has turned a non-performing asset (NPA). The first of the two bankers aware of the process said SBI expects to complete the monetization in a year’s time. “In 2020, the final investment decision is likely and once that is done, the value of the project increases significantly. The value increases and other buyers might be interested and might offer a good value. We are hoping to recover our money," said the second banker.
On 29 August, Mint reported that the consortium of lenders was seeking dispensation from the Reserve Bank of India (RBI) to restructure the debt of VOVL.
VOVL was one of the 32 NPA accounts falling under the purview of RBI’s 12 February circular, which asked banks to put in place a resolution plan within 180 days of the first default.
According to RBI guidelines, loans given to infrastructure projects will be classified as NPAs if they fail to commence commercial operations within two years of the original date.
The Videocon Group and its consortium partners—IBV Brasil Petroleo Ltd and Bharat PetroResource Ltd—had plans to begin production from its fields in Brazil and Indonesia by 2019, which has now been postponed to 2021.
VOVL, which was founded in 2011, is engaged in extraction of oil and gas through its subsidiaries incorporated across the globe.
VOVL holds shares in Videocon Hydrocarbon Holdings Ltd, a Cayman Islands company that was set up in 2009 for its international oil and gas assets in Brazil, Indonesia and East Timor.
The company has interests in four major blocks in Brazil through an equal joint venture, IBV Brasil Petroleo Ltd, with Bharat PetroResource Ltd. Brazil’s national oil company Petrobras SA, is the operator in three of the four blocks.
So far the Videocon Group has invested around $2 billion in these fields, along with its consortium partners.
A 9 March Mint report said the Videocon Group was looking to raise ₹ 30,000 crore by selling its stake in oil blocks in Brazil as part of the company’s debt reduction plan.
According to the RoC (registrar of companies) filings, VOVL’s total debt stood at ₹ 1,189.40 crore as of 31 March 2016.
This is part of the consolidated debt of the Videocon Group, which stood at ₹ 44,000 crore as of July 2017. Videocon borrowed ₹ 22,000 crore for its Indian businesses and another ₹ 22,000 crore from international entities for the oil and gas business.
Last year, SBI filed insolvency proceedings against Videocon Industries Ltd and Videocon Telecommunications Ltd, which were both part of the second list of large corporate defaulters identified by RBI for being referred to the National Company Law Tribunal (NCLT).