Road to resolution: Almost all Lanco units to land in insolvency courts

Almost all the operational and under-construction power assets of debt-laden Lanco group are expected to land in insolvency tribunals as the lenders were not able to conclude resolution for any of the remaining three large projects of the company before the August 27 deadline set by the Reserve Bank of India (RBI).
 
“Going by the RBI’s February 12, Circular, which gave 180 days time till August 27 to resolve large debt accounts of the size of over Rs 200 billion, Lanco Kondapalli (Rs 33 billion), Lanco Anpara (Rs 60 billion), and Lanco Vidarbha (Rs 45 billion) should also be referred to the National Company Law Tribunal(NCLT) in the coming days," a senior company official told Business Standard.
 
In June, Axis Bank had put up 1,500-Mw Lanco Kondapalli for sale after the lenders had taken over 51 per cent equity of the gas power subsidiary under the provisions of Strategic Debt Restructuring (SDR) some time back. While the expressions of interest (EoIs) were received for the asset, the process did not go by the time of expiry of August 27 deadline, according to sources.
 
Lanco Anpara Power, with a fully operational 1,200 Mw power project in Uttar Pradesh, had defaulted on repayment to banks ever since it had entered into a PPA litigation with the state power utilities few years ago. Till now, the lenders made no big move to recover the dues in the hope of a settlement between the company and the Discoms in the Anapara case. The 1,320-Mw Lanco Vidarbha Thermal Power, which remained incomplete, found no takers.
 
Lanco group has a total debt of over Rs 500 billion. The four group entities -Lanco Infratech (Rs 110 billion), Lanco Amarkantak (Rs 110 billion), Lanco Babandh (Rs 67 billion), and Lanco Teesta Power (Rs 27 billion) are currently facing insolvency proceedings. With the other three projects coming, about Rs 410 billion of the total Rs 500 billion debt of the group will be settled through the Insolvency and Bankruptcy Code (IBC), 2016.
 
Lanco's portfolio comprises power assets, with a total installed capacity of 3,465 Mw, besides another 4,536 Mw capacity of under-construction projects that remained struck for want of additional funding. The first set of troubles started with a shortage of feedstock to gas power units, a substantial portion of which has no power purchase agreements (PPAs).  Then came the bigger trouble when the company failed to complete a set of its large coal-fired power projects, including Amarkantak and Babandh, leading to cost over-runs. Doubting the repayment capacity, banks refused to provide additional funds. By 2016, the average cost of Lanco's under-construction thermal power projects surpassed Rs 90 million a megawatt, when a maximum of Rs 60 million a megawatt was considered acceptable. The decrease in power prices dealt a double blow to such stranded projects.
 
Lanco started posting losses from 2012-13, at a time its gross revenues reached around Rs 152 billion. After insolvency phase, the company is expected to shrink to a revenue size of Rs 15 billion, which would come from a set of solar, road, and property projects. Hinting at a large haircut, State Bank of India Chairman Rajnish Kumar recently announced that the average recovery of debt expected from all those power assets undergoing insolvency proceedings was just about Rs 30 million a megawatt.
 

Union Bank moves NCLT against Gammon India
 
Gammon India has been taken to the NCLT in Mumbai for insolvency proceedings by Union Bank of India. The firm failed to repay a term loan of Rs 3.15 billion provided by the bank, which prompted the lender to file for proceedings.
 
 
NCLT directs lenders to appoint RP for Uttam Galva Steels
 
Uttam Galva Steels has been directed by the Mumbai Bench of the NCLT to appoint an interim resolution professional to oversee the insolvency resolution. The company owes 18 lenders Rs 62 billion in principal and interest payment.
 

• Last week NCLT ordered the liquidation of Lanco Infratech Limited, the group holding company with a stand-alone debt of Rs 110 billion

• Three of the group entities- Lanco Amarkantak, Lanco Babandh and Lanco Teesta with a combined debt of Rs 204 billion were already referred to NCLT

• With the expiry of the RBI deadline, the insolvency proceedings remain the only option for the other three large assets-  Lanco Kondapalli, Lanco  Anpara and Lanco Vidarbha, which together carry a debt of Rs 138 billion.

• Lanco group has a consolidated debt of over Rs 500 billion out of which these seven entities carry a debt of close to 420 billion.

• The combined installed capacity of Lanco power assets:  3465 MW operational; 4,536 MW capacity under construction