BS: Sterling Biotech lenders accept one-time settlement, agree to 65% haircut

9 March 2019: Lenders have agreed to a one-time settlement offer made by the controversial promoters of Sterling Biotech, who have defaulted on bank dues worth Rs 15,000 crore. The promoters, bankers said, have made an offer that entails a haircut of close to 65 per cent for the lenders.

In a statement to the stock exchanges, the company said, “The committee of creditors has approved the withdrawal of the Corporate Insolvency Resolution Process of the company with requisite majority.” 

Lenders had rejected a resolution plan by ACG Associated Capsules Pvt Ltd and also another on liquidation, the company had said on Wednesday. 

A senior public sector bank executive said the promoters Chetan and Nitin Sandesara have roped in an overseas investor to repay the loans and plan to pay part of the outstanding amount to show that their intention is to clear the debt. 
“The promoter has already deposited 5 per cent of the OTS (one-time settlement) offer to banks,” said the source. 

While going in for resolution, the Indian lenders have the option either to recover, rectify or restructure the account.

In this case there is no issue of restructuring and is a case of recovery by way of sale of assets or settlement, said a banker. Almost 90 per cent of the lenders have agreed to the OTS.

Lenders decided to withdraw the account from the National Company Law Tribunal after it was referred for debt resolution under the Insolvency and Bankruptcy Code (IBC), 2016 in June last year.

Bankers said the decision to take it out of NCLT was taken as the liquidation value would be far lower than the dues and the liquidation process will take a lot of time. Hence, in the CoC meeting held on March 4 and 5, lenders rejected a resolution to send the company for liquidation under the IBC. 

According to the annual report for March 2018, signed by its resolution professional (RP) in December 2018, the financial creditors have made claims worth Rs 14,939 crore against the company. Of this, the RP has admitted claims worth Rs 8,967 crore as on November 21, 2018. As on March 31, 2018, reported loans, borrowings and external commercial borrowings stood at Rs 7,564 crore.

The application for settlement was made under section 12A of IBC that gives an opportunity to promoters to make an offer for the firm if binding bids have not been submitted subject to 90 per cent of the lenders agreeing. 

In its annual report, the company said that it was under investigation by the Enforcement Directorate (ED) which undertook a search and seizure operation at its Mumbai and Vadodara office in August 2017. The company is also under investigation by the Central Bureau of Investigation and the Serious Fraud Investigation Office. On May 29, 2018, the ED has attached the properties of the company. The promoters of the company are based overseas.

Interestingly, on February 14 this year, the promoters of Sterling Biotech — Chetan, Chetan’s wife and Nitin Sandesara as well as Hiteshkumar Patel moved a Delhi court seeking cancellation of open-ended non-bailable warrants issued against them, PTI reported. The matter will be heard on April 2.

The case, according to PTI, relates to 249 companies incorporated in the country by promoters. Of this, 200 firms were found to be of ‘benami’ entities used to siphon off loan funds obtained from various banks. The agency had said from the investigation conducted so far, the total amount involved in the money laundering, which “was nothing but proceeds of crime” in the matter, has been quantified at about Rs 8,100 crore.

The charge sheet, filed under the various provisions of Prevention of Money Laundering Act, accused the company of taking loans from a consortium of banks led by Andhra Bank, which had turned into non-performing assets. It said the accused manipulated figures in the balance sheets of their flagship companies and induced banks to sanction higher loans.

The Business Standard reported



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