Vishal Retail lenders vet rivals’ bids

MUMBAI: The lenders to Vishal Retail on Wednesday compared rival proposals from the Future Group and private equity firm TPG at a meeting held in New Delhi. Sources from the banking sector said no conclusive decision was taken.

“It was a meeting of members of the monitoring committee, which comprise officers in the rank of general managers. The officials discussed the pros and cons of both the bids,” said a bank official on condition of anonymity. “Each bank will now present the proposal of the bidders to its credit committee, before taking any final decision,”
he added.

Banks have lent Rs 750 crore to the debt-laden Vishal Retail, which wants its loans to be restructured. State Bank of India (SBI), HSBC, Bank of India, ING Vysya, UCO Bank and HDFC Bank are the key lenders to Vishal Retail.

Restructuring refers to a reduction in interest rate or an increase in the numbers of years over which the loan can be repaid, or both.

The banks which met on Wednesday comprised only secured lenders. Foreign bank DBS Bank has opposed the implementation of the package and got a stay from Delhi High Court on any sale of assets by Vishal Retail. It is unclear how this will affect any final transaction. The secured lenders are part of the corporate debt restructuring or CDR cell. The CDR forum is a formal mechanism put in place by banks to resolve bad loan situations.

People present in the meeting said Vishal Retail’s fate will eventually be decided by an empowered group — which comprise of bank CEOs. The empowered group, which is slated to meet after a fortnight, will decide the identity of the new owner of Vishal Retail. Banking sources had earlier said that the lenders were inclined to the offer from the Future Group, though a final decision had not been taken.

About a month ago, Vishal Retail had announced a tie-up with TPG, which was approved by the lenders. As per the TPG proposal, the assets of Vishal Retail would be hived off into a separate entity, in which TPG will hold 82% equity stake and the balance will be held by banks. It had also proposed that a debt of Rs 175 crore will be converted into compulsorily convertible debentures, which will be converted into equity at Rs 108 per share by 2015.

A fortnight after banks cleared the TPG proposal, Future Group had written to the CDR cell, expressing its interest to acquire the assets of Vishal Retail. After the Future Group entered the fray, TPG deposited Rs 25 crore with SBI to indicate its commitment to Vishal Retail. The Future Group has proposed that Vishal Retail’s assets be transferred to Future Value Retail, a subsidiary of Future Group.

Sources from the banking sector say that the secured lenders will also keep in mind the restructuring package offered to unsecured lenders before taking a final call on which company to support.

TPG has proposed that VRL restructure the loans of unsecured lenders amounting to Rs 266 crore while the Future group has indicated that it will help Ram Chandra Agarwal, the key promoter of the ailing company, to settle dues.