Local lenders told to buy out Dabhol's foreign debt

Stung by the US Bankruptcy Court's order allowing GE and Bechtel to acquire Enron's stake in Dabhol Power Company, the Naresh Chandra committee today asked domestic lenders to expedite the takeover of foreign lenders' $300 million debt.

After taking stock of the latest development, it was felt that the acquisition of overseas lenders' debt portfolio by domestic institutions would be critical to counter the GE-Bechtel combine's increased equity in DPC. At present, DPC's equity is pledged with both Indian and overseas lenders.

The meeting of the panel was attended by Adviser to Finance Minister Vijay Kelkar, Financial Sector Secretary NS Sisodia, IDBI Chairman M Damodaran, ICICI Bank Deputy Managing Director Kalpana Morparia and State Bank of India Managing Director Chandan Bhattacharya.

When asked about the government's position, Chandra told Business Standard, "It was a US court proceeding. We did not want to interfere."

With the GE-Bechtel combine picking up 52 per cent stake in DPC, the government sees the possibility of being hauled up in an international court again by the two US companies for expropriation. GE and Bectel have already initiated legal action against the government of India for expropriation.

The Centre had provided a counter guarantee to DPC, in which Enron held 65 per cent, GE and Bechtel 10 per cent each, and the Maharashtra government the balance 15 per cent.

Sources said the consequences of the GE-Bechtel combine acquiring controlling stake in DPC could also result in a lower realisation of dues by domestic lenders. "GE-Bechtel will be on the stronger side of the negotiating table. Earlier, Enron, which had filed for bankruptcy, did not have much bargaining power," said a source.

The sources said today's meeting was primarily called to discuss the bidding process, the structure of bids and the time frame for calling for bids.

The government had asked the domestic lenders in November last to buy over the overseas lenders' debt portfolio in DPC. However, it has not yet fructified.