REC looks to sell Rs 2,848 cr bad loans in Corporate Power with 98% haircut

State-owned REC Ltd is looking to sell bad loans worth Rs 2,848 crore in Corporate Power Ltd (CPL) and has invited counterbids through a Swiss challenge auction, initiated by an anchor bid of Rs 58.65 crore. This would result in a recovery of just 2.05 per cent for the lender, or a haircut of almost 98 per cent, if no counter bids are received.

 

CPL is a special purpose vehicle (SPV) of the Abhijeet group incorporated in 2006 to set up a 540 megawatt (Mw) power plant in Latehar district of Jharkhand. Currently, CPL is under liquidation.

 

REC’s exposure to CPL is part of a term loan extended by a consortium of lenders, where its voting share is 19.55 per cent in the liquidation process. 

 

 

The state-owned lender, which provides long-term loans and other financing products to government and private companies for infrastructure development, has invited expressions of interest (EoIs) from entities interested in acquiring the bad loans by January 28. Counterbids must be submitted by February 2, with the Swiss challenge auction scheduled for February 5.

 

Additionally, the lender has stated that the counterbids will have to be placed on a full cash basis, and with a markup of at least Rs 3 crore over the anchor bid.

 

If there are any counterbids, the anchor bidder will have the option to either match the counter bid or submit a higher bid. However, if no counter bids are received during the Swiss auction process, the anchor bid will be declared the successful bid.

 

The anchor bidder, whose name has not been disclosed by the lender, will bear REC’s contribution toward unpaid liquidation cost amounting to Rs 1.95 crore over and above the bid amount of Rs 58.65 crore.

 

CPL was admitted into insolvency, and a corporate insolvency resolution process was initiated following an application by Asset Reconstruction Company (India) Ltd (ARCIL). Although seven EoIs were received from prospective resolution applicants, only one resolution plan, submitted by Vedanta Ltd, had come in. However, Vedanta's plan was found non-compliant with the provisions of the Insolvency and Bankruptcy Code (IBC), and was not put to a vote by the committee of creditors (CoC). Subsequently, a plea for liquidation was filed, and the National Company Law Tribunal (NCLT) approved it.

 

In October last year, the enforcement directorate (ED) attached assets worth Rs 500 crore in a Rs 4,000 crore bank fraud and money laundering case against CPL and its promoters and directors Manoj Jayaswal, Abhijeet Jayaswal, and Abhishek Jayaswal. The money laundering probe was initiated based on a first information report (FIR) filed by the Central Bureau of Investigation (CBI) against CPL and its promoters, alleging criminal conspiracy, cheating, and forgery.