Siva lenders to receive Rs 5 crore cash upfront, take 94% haircut

To receive Rs 318 crore of total dues amounting to Rs 4,863 crore

Siva Industries and Holdings’ (Siva Industries’) lenders, led by IDBI Bank, have approved a one-time settlement proposal of the firm under which they will take home Rs 318 crore, with Rs  5 crore as upfront cash, out of the company’s total dues of Rs 4,863 crore. This amounts to a haircut of 93.5 per cent.

According to the proposal, the lenders will get Rs 313 crore, excluding the upfront payment, within 180 days of receiving the National Company Law Tribunal’s (NCLT’s) approval.

International Asset Reconstruction Company (IARCPL) and Masdar Energy of UAE have taken over 40 per cent of the loans from the banks after the default, said a Siva group source. “The IARCL bought Canara Bank’s loan for Rs 500 crore. Canara had an exposure of Rs 1,150 crore and has already received Rs 100 crore. It still has some land that is worth another Rs 520 crore,” said a source close to the development.

As a result, the lenders have filed an application under Section 12A of Insolvency and Bankruptcy Code (IBC) before the NCLT’s Chennai Bench for withdrawing the proceedings against the company.

Siva Industries was admitted for bankruptcy proceedings on July 5, 2019. An initial offer from Royal Partners Investment Fund was rejected, and the resolution professional then filed the liquidation petition before the registry.

However, one of the shareholders, Vallal RCK, subsequently filed an application before NCLT, Chennai, on August 31, 2020, asking the committee of creditors (CoC) to consider the one-time settlement offer made by the promoter. In October last year, the NCLT directed the resolution professional to convene a meeting of CoC to consider the OTS.

In April, the CoC approved the OTS and the resolution professional was authorised by IDBI Bank to file an application under Section 12A of the IBC for withdrawal of bankruptcy proceedings. According to the OTS, the settlement amount will be paid from the funds/debt to be raised by the promoter either on its own or out of the proceeds from either sale of assets, raising debt or external capital raise using the assets offered as security to lenders.

Meanwhile, lenders have also agreed to withdraw all pending legal proceedings against Siva group companies as part of the resolution plan.

After the plan’s approval, the existing board of directors of Siva Industries will be reinstated and after the receipt of the settlement amount, all accounts of Siva Industries will be regularised and called a “standard" asset.

The IBC was enacted by the Narendra Modi government to make sure that chronic defaulters are punished and their companies are sold to the highest bidder. However, barring a few success stories, recovery of dues from defaulters has fallen to new lows. Almost half the cases closed by Indians lenders under IBC in financial year 2020-21 ended in liquidation, while only 13 per cent of cases were resolved.