Lenders seek better offers for CG Power under Swiss Challenge2 min read . Updated: 12 Aug 2020, 10:45 AM IST
- This comes after Murugappa Group-led Tube Investments of India Ltd agreed to invest ₹700 crore in the company for a 56% stake
MUMBAI: Led by State Bank of India (SBI), lenders to CG Power and Industrial Solutions Ltd on Wednesday sought resolution plans from bidders under the Swiss Challenge method, according to a public notice. This comes after Murugappa Group-led Tube Investments of India Ltd agreed to invest ₹700 crore in the company for a 56% stake.
Under the Swiss Challenge method, a prospective buyer offers a bid to the lender, which then publicly calls for counter bids from other potential buyers. The new bidders are expected to put in higher bids than the original bidder, making the process more competitive.
All lenders to CG Power have entered into an inter-creditor agreement on 11 August, under the Reserve Bank of India’s (RBI) stressed asset resolution framework of 7 June 2019. They have also appointed SBI Capital Markets Ltd (SBI Caps) as process advisors.
“While we have an offer from the Murugappa Group, the Swiss Challenge method will help us improve on it and lead to better recovery," said a banker aware of the transaction.
CG Power had said last week that two companies have reached a securities subscription agreement (SSA) which gives Tube Investments of India Ltd control over 64.25 billion equity shares of face value of ₹2 each at ₹8.56 (including premium) per equity share aggregating to ₹550 crore. This will give Tube Investments control over 50.62% of CG Power post the equity shares allotment.
Tube Investments will also get 17.52 billion warrants, each carrying a right, exercisable by the warrant holder to subscribe to one equity share per warrant within 18 months from the date of allotment. Aggregate of the equity shares upon exercise of the warrants is ₹150 crore. After the conversion of the warrants, the Tube Investments stake in CG Power will grow to 56.61%.
“CG Power and Industrial Solutions Ltd is in default of its debt that is owed to certain banks and financial institutions. The lenders of the company have formed a joint lenders’ forum, with State Bank of India acting as the lead bank for the process," the notice said on Wednesday, adding that the primary bidder will be given an opportunity to better the terms of the highest offer received under Swiss Challenge.
It added that following a board resolution on 10 August, the company has agreed to run the resolution process jointly with the lenders.
In August last year, CG Power had said advances to related and unrelated parties and the Avantha Group may have been potentially understated by ₹1,990.36 crore and ₹2,806.63 crore, respectively. The board had said certain assets of the company were purportedly provided as collateral without due authority and that the company was made a co-borrower and/or guarantor for enabling ostensibly unrelated third parties to obtain loans without due authorization.