You are here: Home>Collections>Uti Bank

Bombay HC clears BPL’s debt restructuring plan

James Mathew & Vivek Sinha, TNN Jun 28, 2005, 12.53AM IST

NEW DELHI: The Nambiars'-controlled BPL has crossed the final hurdle to its restructuring plan, which will result in a 50:50 JV with Japanese electronics giant Sanyo.

The Bombay High Court has dismissed the appeal of Bank of Rajastan, UTI Bank and IndusInd Bank, which had called for a stay on the order of Kerala HC, which passed the Rs 1,500-crore corporate debt restructuring (CDR) plan after the required number of lenders cleared the CDR programme.

The decision is significant, given that the appeal filed by the consortium of banks led by BoR, was the first such case where a bank has gone to court against a CDR programme.

The final hearing has been set for July 12, which should enable BPL to implement the restructuring plan and get back on track as a new venture. BoR had claimed that BPL was a wilful defaulter.

As per existing rules, accounts of wilful defaulters are not allowed to be taken up by the CDR.

According to RBI norms, even if one bank has declared a company as wilful defaulter, its case cannot be referred to the CDR.

But according to the new draft report on finetuning the CDR mechanism, the CDR group can consider such accounts on a case-to-case basis, bringing flexibility in handling such non-performing assets of lenders.

The CDR group had argued that the debt restructuring of the company was cleared by a group of lenders before they were informed about BPL being tagged as a wilful defaulter.

Interestingly, sources said BoR was present at all the CDR meetings on the BPL issue and did not raise any objection. It, however, wrote to RBI objecting to the CDR package citing the reason of 'wilful defaulter' only much later after the package was approved by the CDR group, sources said.

With the final hearing on the case scheduled for the next fortnight, the erstwhile market leader in CTVs will now get on with the implementation of the restructuring plan.

As the restructuring scheme, BPL will transfer its CTV business - valued at $80m - including the brand and its manufacturing assets into a 50:50 JV with Sanyo.

Sanyo will bring in $50m as initial investment in the JV, of which, $40m is in the form of external commercial borrowing convertible into equity. In total, Sanyo will have an exposure of $70m in India.

A major part of these funds will be utilised to meet commitment to creditors.