Insolvency: Arun Jagatramka's Gujarat NRE Coke proposes revival scheme

According to the scheme, Rs 5 bn of sustainable debt would be paid in 10 years to secured creditors on a quarterly basis with an interest of 8.10 per annum

In one of the first cases, Arun Jagatramka, promoter of Gujarat NRE Coke, has proposed a revival scheme under the Companies Act, 2013, even as the firm is undergoing liquidation under the Insolvency and Bankruptcy Code (IBC). 

The scheme has been proposed under Section 230 of the Companies Act, 2013, to revive the firm with the consent of all stakeholders — shareholders, unsecured creditors as well as secured creditors. 

According to the provisions of Act, 75 per cent consent would be required from each class of stakeholders, said Jagatramka. 

The scheme was presented before the Kolkata bench of the National Company Law Tribunal (NCLT), which has ordered to convene a meeting of all the stakeholders on July 16. The NCLT has appointed Sumit Binani to convene the meeting. The tribunal had earlier named Binani the liquidator of the firm and prior to that he was the resolution professional (RP). There are four classes of stakeholders for Gujarat NRE Coke — secured creditors, unsecured creditors, FCCB holders and equity shareholders.

According to the scheme, Rs 5 billion of sustainable debt would be paid in 10 years to secured creditors on a quarterly basis with an interest of 8.10 per annum. Also, new equity shares of Rs 0.40 billion of face value Rs 1 each and Rs 29.61 billion compulsory redeemable preference shares will be issued. The admitted claims of the secured creditors is Rs 35.01 billion.  

The claims of FCCB holders aggregating to Rs 1.39 billion, as on cut-off date, would be reduced by 90 per cent and the balance would be converted into new equity shares of face value Rs 1 each. The dues of the unsecured creditors, Rs 15.02 billion, would be reduced by 50 per cent and paid as under in full and final settlement of their entire dues. After implementation of the scheme, promoters’ shareholding would come down to 17.52 per cent from 25.61 per cent while lenders’ holding would increase to 38.83 per cent from 32.39 per cent.

Unsecured creditors would be offered equity shares and preference shares after some haircut, according to their respective classes. This is as against no realisation that the unsecured creditors will have got under liquidation. 

The liquidation value of Gujarat NRE Coke was around Rs 3.50 billion. Promoters of Gujarat NRE Coke had moved the NCLT for resolution. A resolution plan was prepared by PwC and submitted within 180 days but could not be implemented as the ordinance barring promoters from submitting resolution plans was promulgated on November 23, 2017.

A sole resolution plan was rejected by the committee of creditors and the NCLT’s Kolkata Bench ordered liquidation of the company as a “going concern”. Jagatramka said he had obtained a stay from the National Company Law Appellate Tribunal (NCLAT) on the sale of assets.

He said equity shareholders totalling more than 2,00,000 would also benefit under the scheme as the shares of the firm would continue to be listed and traded as against being delisted in the liquidation process. 

Further, the proposed equity restructuring under the scheme would allow them to reap benefits of future upside in equity.