RIL-JM Financial to take over Alok Industries as lenders settle for 83% haircut

Reliance Industries in partnership with JM Financial ARC is set to take over bankrupt Alok Industries at less than a third of the total loan value, with 72% of the lenders voting in favour of the deal. This follows the recent amendment in the Insolvency and Bankruptcy Code (IBC) that stipulates a resolution plan can be approved if 66% of lenders vote in favour against 75% previously.

The Reliance Industries-JM Financial ARC combine was the sole bidder for the bankrupt textile company but their plan had been rejected twice in the past. The partnership had offered Rs 5,050 crore in the second round on April 13, about Rs 100 crore more than the first round on April 11. The resolution plans had got 70% and 71% support, respectively.

The offer of Rs 5,050 crore translated into an 83% haircut on dues of Rs 29,500 crore. At the end of the 270-day period allowed for putting in place a resolution plan in April, the resolution professional filed for liquidation at the Ahmedabad bench of the National Company Law Tribunal (NCLT). The bankruptcy court ruled in June that lenders should consider voting once again following changes in the IBC.


MARATHON MEETINGS
Over the past three days, lenders held marathon meetings on Alok Industries over the tribunal’s ruling and the need for yet another round of voting, considering that there won’t be any change in the resolution plan on offer.

NCLT had asked the resolution professional “to present the resolution plan of the sole resolution applicant before the CoC (committee of creditors) for a relook and for proper consideration in view of the amendment made in the statute, in the same parameter as it was earlier considered without incorporating any new issues which were not taken into account while considering the resolution plan submitted by sole applicant.”

The tribunal went on to say that the resolution professional “consider only the voting process as per the amended provisions made in the code and to submit its report along with the resolution of the CoC for consideration before adjudicating authority.” The tribunal asked the RP to submit its report by June 25. Alok Industries is among the 12 companies referred to bankruptcy court at the direction of the Reserve Bank of India in May last year.