A consortium of lenders has given a fresh lease of life to the troubled Shiv-Vani Oil and Gas Exploration Services, through corporate debt restructuring (CDR). In the process, allegedly ignoring directions from the high court here.
The company’s foreign currency convertible bond (FCCB) lenders, represented by Citicorp International, which had secured orders of the court in a winding-up petition, are exploring legal options, including a contempt petition.
The Delhi HC, in orders dated August 26 and 30, 2013, had made it clear to the lenders, who were contemplating a CDR, that any fresh encumbrance would be subject to its orders. However, the consortium through its IL&FS trustee company created a fresh charge of Rs 322 crore in March, seven months after the court direction. The total exposure of the 24 lenders, which comprise private and public sector banks and institutions, was Rs 3,250 crore, more than twice its equity.
An email sent to a spokesperson of IL&FS was unanswered, as were emails sent to officials of the 17 institutions which were signatories to the CDR. Email questionnaires sent to promoters Padam Singhee, Prem Singhee and chief financial officer Rajan Gupta last week, seeking details of the CDR and strategy, got no response.
The developments could complicate matters for the company, whose Rs 200 crore term loan from Bank of Maharashtra (BoM), a member of the consortium, is already a subject of a Central Bureau of Investigation (CBI) probe. CBI registered preliminary enquiry against BoM for several transactions facilitated by chartered accountant Pawan Bansal. Arrested by CBI last month, the latter had allegedly used his company, Altius Finserv, to collect fees from companies which paid him to get loans sanctioned. A part of these ‘fees’ were then passed on to bank officials, is the allgation.
Shiv-Vani, as the largest onshore rig owner and operator, was positioned well to benefit from the Union government’s expansion plans and increased spending in onshore exploration. It also had a healthy order book of around Rs 4,000 crore, in a sector where entry barriers are high.
It used to also have a healthy business relationship with the government’s Oil and Natural Gas Corporation (ONGC), the largest exploration entity. However,over the past couple of years, stock prices have plummeted amid allegations of mismanagement and violations. ONGC, its main client, blacklisted the firm. In May this year, the company failed to file its audited financial results within the mandated deadline.
In a filing with the BSE exchange on May 21, Shiv-Vani said it was facing a financial crunch due to directions from the service tax department to its debtors to pay directly to the department against their overdues and most of the priority loans under the CDR were not disbursed due to delay in documentation.
As a result, it said, "most of the supporting staff has left the service due to non-payment of their remuneration. Therefore, the company is unable to prepare and finalise the books of accounts by May 30, for the year ended March 31, 2014”.
Faced with a classic lender's dilemma, the bankers seem to have decided to throw more good money at Shiv-Vani one more time. It is not clear if this will be enough. Apart from bank loans, the company had raised FCCB worth $80 million (Rs 480 crore), maturing in August 2015. But, as it defaulted on payment deadlines, the FCCB lenders initiated winding-up proceedings in July last year. In August 2013, the Delhi HC ordered a freeze on the assets.
In the order dated August 26 last year, the HC said: “Having regard to the fact that the respondent company has approached a consortium of bankers for implementation of the CDR which will not take in its fold the petitioner company, who is an unsecured creditor, the prayers...are granted. The respondent company, its directors, promoters, officers, servants and agents are restrained from finalising or implementing any CDR scheme.” Subsequently on appeal, the court relaxed the conditions saying any fresh encumbrance created would be subject to its orders.
The company’s foreign currency convertible bond (FCCB) lenders, represented by Citicorp International, which had secured orders of the court in a winding-up petition, are exploring legal options, including a contempt petition.
The Delhi HC, in orders dated August 26 and 30, 2013, had made it clear to the lenders, who were contemplating a CDR, that any fresh encumbrance would be subject to its orders. However, the consortium through its IL&FS trustee company created a fresh charge of Rs 322 crore in March, seven months after the court direction. The total exposure of the 24 lenders, which comprise private and public sector banks and institutions, was Rs 3,250 crore, more than twice its equity.
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Under the CDR terms, the lenders sacrifice nearly Rs 400 crore. The contribution of the promoters, the Singhee family, would be around Rs 100 crore. Of this, the promoters have brought Rs 50 crore in the form of equity shares.
An email sent to a spokesperson of IL&FS was unanswered, as were emails sent to officials of the 17 institutions which were signatories to the CDR. Email questionnaires sent to promoters Padam Singhee, Prem Singhee and chief financial officer Rajan Gupta last week, seeking details of the CDR and strategy, got no response.
The developments could complicate matters for the company, whose Rs 200 crore term loan from Bank of Maharashtra (BoM), a member of the consortium, is already a subject of a Central Bureau of Investigation (CBI) probe. CBI registered preliminary enquiry against BoM for several transactions facilitated by chartered accountant Pawan Bansal. Arrested by CBI last month, the latter had allegedly used his company, Altius Finserv, to collect fees from companies which paid him to get loans sanctioned. A part of these ‘fees’ were then passed on to bank officials, is the allgation.
Shiv-Vani, as the largest onshore rig owner and operator, was positioned well to benefit from the Union government’s expansion plans and increased spending in onshore exploration. It also had a healthy order book of around Rs 4,000 crore, in a sector where entry barriers are high.
It used to also have a healthy business relationship with the government’s Oil and Natural Gas Corporation (ONGC), the largest exploration entity. However,over the past couple of years, stock prices have plummeted amid allegations of mismanagement and violations. ONGC, its main client, blacklisted the firm. In May this year, the company failed to file its audited financial results within the mandated deadline.
In a filing with the BSE exchange on May 21, Shiv-Vani said it was facing a financial crunch due to directions from the service tax department to its debtors to pay directly to the department against their overdues and most of the priority loans under the CDR were not disbursed due to delay in documentation.
As a result, it said, "most of the supporting staff has left the service due to non-payment of their remuneration. Therefore, the company is unable to prepare and finalise the books of accounts by May 30, for the year ended March 31, 2014”.
Faced with a classic lender's dilemma, the bankers seem to have decided to throw more good money at Shiv-Vani one more time. It is not clear if this will be enough. Apart from bank loans, the company had raised FCCB worth $80 million (Rs 480 crore), maturing in August 2015. But, as it defaulted on payment deadlines, the FCCB lenders initiated winding-up proceedings in July last year. In August 2013, the Delhi HC ordered a freeze on the assets.
In the order dated August 26 last year, the HC said: “Having regard to the fact that the respondent company has approached a consortium of bankers for implementation of the CDR which will not take in its fold the petitioner company, who is an unsecured creditor, the prayers...are granted. The respondent company, its directors, promoters, officers, servants and agents are restrained from finalising or implementing any CDR scheme.” Subsequently on appeal, the court relaxed the conditions saying any fresh encumbrance created would be subject to its orders.