Bankers, financial institutions to take around 95% hair cut in NOCL

Bankers and other financial institutions will take around 95 per cent cent hair cut in Nagarjuna Oil Corporation (NOCL). Haldia Petrochemicals (HPL) has agreed to pay Rs 600 crore to revive NOCL and Liquidator of NOCL inturn has agreed to pay Rs 560 crore (of the Rs 600 crore) to Secured Financial Creditors for which the company need to owe Rs 9,864.16 crore. On the principal the lenders will recover 25 per cent.

On Thursday, the National Company Law Tribunal (NCLT), Chennai gave its nod for Haldia Petrochemicals (HPL) scheme, submitted through the Liquidator V Mahesh, for the revival of Nagarjuna Oil Corporation Limited (NOCL).

HPL, which was represented by Raj Jhabakh, partner J&M Legal, being desirous of reviving the Project and setting up a “Refinery cum Petrochemical Complex” over the aforesaid land has offered to acquire and takeover the Project Assets free from all encumbrances of whatsoever nature, including the entire Owned and Leasehold lands of the NOCL and shall effect payment in phased manner (stages) of a total sum of Rs 600 Crore to the Liquidator for settling and effecting payment of the dues of the Company.

".... the recovery amount from NOCL is barely 6 % of the admitted Claims of the Secured Creditors, the other categories of the claimants are unlikely to get any amounts towards their claims, including Statutory Authorities, barring priority payments payable as per Section 53 of the IBC, 2016," mentioned in the Order.

However, NOCL's shareholders equity of Rs 1,800 crore got wiped out completely.

According to the HPL's scheme Rs 560 crore will be distributed for secured creditors. The lenders include SBI, IDBI, PNB & United Bank, HUDCO, Canara Bank & Syndicate Bank, Bank of India, Union Bank of India, Central Bank of India, Indian Bank, LIC and UCO Bank.

NOCL dues including for Secured Financial Creditors including banks and financial institutions holding charge over the assets and properties of the Company Rs 9,864.16 crore, claims received & admitted for the Unsecured Financial Creditors amounting to Rs.10.98 crore.

Meanwhile NOCL officials noted, term Loan principal amount is roughly Rs 2,200 crore. Remaining Rs 7,800 crore is interest and penal interest etc until July 2017. The interest is high because it became NPA long before it was referred to NCLT, unlike many other companies which became NPA only a short while before they were referred to NCLT in 2017.

So recovery of Rs 560 crore out of Rs 2,200 crore is roughly 25 per cent.

Employees have lost Rs 42 crore in salaries for roughly three years.  But for this meticulous process by Liquidator Mahesh (as described in NCLT order), SIPCOT would have taken back its 1600 plus acres of land and the old machinery would have been sold as scrap by weight. It would not have fetched more than Rs 50 crore for the Lenders, compared to Rs 560 crore now.

Further, because HPL will pump in funds soon, there will be industrial activity and employment generation in Cuddalore District.

HPL is planning to invest around Rs 50,000  crore to convert this refinery into a petrochemical complex. The Company is having majority shareholding and management control with the Chatterjee Group (TCG). TCG directly and indirectly owns 72.66 % of shares, whereas the Government of West Bengal directly and indirectly owns 9.19 % of outstanding shares, the Indian Oil Corporation directly owns 8.89% of outstanding shares and the TATA Group directly and indirectly owns 2.67% of outstanding shares. Remaining shares are owned by Financial Institutions and other minority shareholders.

Haldia Petro was among the three prospective bidders, the other two are Accord Distillers and Brewers P Limited and Adani Ports and Special Economic Zone Limited. However, Accord Distillers & Brewers P. Ltd., in September 2019 withdrew from the Bidding process.

NOCL has earlier failed to get a successful resolution plan in the Corporate Insolvency Resolution Process (CIRP) and in December 2018, the National Company Law Tribunal (NCLT), Chennai, ordered liquidation of the company, which is an associate of Nagarjuna Oil Refinery Ltd (NORL).

Haldia Petrochemicals Limited, Accord Distillers and Brewers P Limited and Adani Ports and Special Economic Zone Limited have submitted Expressions of Interest (EOI) to revive NOCL, however Accord Distillers withdrew its EOI later.

Out of the two Prospective Bidders, Haldia Petrochemicals Limited has submitted a Scheme in October 2019. The Liquidator has sought approval for the Scheme submitted by Haldia Petrochemicals Limited (Final amended Scheme after due negotiations was submitted by the Bidder on February 20, 2020) from the National Company Law Tribunal, Chennai.In October 2020, the Liquidator has also filed a company petition seeking approval for the Scheme of Compromise or Arrangement proposed between the Secured Financial Creditors of NOCL - CUL and Haldia Petrochemicals Limited (Scheme Proponent).

NOCL, a joint venture between Hyderabad’s Nagarjuna Fertilizers & Chemicals Ltd (NFCL) and TIDCO of Tamil Nadu Government,  is carrying out a 6 million metric tonnes per annum (MMTPA) petroleum and oil refinery project in Cuddalore, almost 200 kilometers south of Chennai, which is stalled due to shortage of funds. The facility is spread over in 2185 acre of land.