HSBC gets Rs 1,000 for safekeeping payment.
It is a deal running into thousands of crores of rupees, but the bank entrusted with safekeeping of Tech Mahindra’s payment for buying out scam-hit Satyam Computer Services will be paid just Rs 1,000 as its fee.
According to the deal reached between the two parties, Tech Mahindra has agreed to deposit Rs 1,756 crore in an escrow account towards the purchase of shares amounting to a 31 per cent stake in Satyam.
Pursuant to their agreement, which has also been approved by the Company Law Board, Satyam and Tech Mahindra have jointly appointed Hongkong and Shanghai Banking Corporation Ltd (HSBC) as the ‘escrow agent’ for safekeeping of this payment.
As part of the agreement, HSBC, the global banking major would open a “no-lien, non-interest bearing account in the name of Satyam-Bidder Escrow Account”. In M&A deals, such accounts are meant for safekeeping of payments made by the bidder till the time the deal is closed, after which it is released to the other party.
“In consideration of undertaking the obligations under this agreement, the escrow agent shall be entitled to receive an amount of Rs 1,000 (one thousand only) as its fees (escrow fee),” solely by the bidder, says the agreement.
Besides, a delayed payment of escrow fee would not entitle HSBC, which has agreed to open such an account at one of its Indian branches, to terminate the agreement.
HSBC’s sole responsibility would be “for the safekeeping and disbursement” of Tech Mahindra’s payment for a 31 per cent equity in Satyam and to the extent that such disbursement shall not cause the escrow account to become overdrawn.”
The agreement mandates that the account should be opened specifically for the purpose of Tech Mahindra’s payment for 31 per cent equity purchase in Satyam through a preferential allotment of shares and both the companies would have to comply with all the ‘know your client (KYC)’ norms of HSBC.
HSBC can terminate the agreement with a 15-day notice if KYC documents submitted by Satyam and Tech Mahindra are not to its satisfaction. In such a case, the two firms would have to appoint another ‘escrow agent’ on identical terms.
