Lenders harden stance on Zee promoter stake sale

Lenders to Essel Group promoters expressed misgivings about the lack of information regarding additional stake sale in Zee Entertainment and shot down a proposal to park all the promoter stake in an escrow account till the completion of the transaction.

The lenders, including mutual funds, still holding Zee Entertainment shares as collateral, demanded details of the sale of additional 10 per cent. Three people familiar with the discussions said that the lenders are growing sceptical about the prospects of a deal as Zee shares have plummeted over 40 per cent since the sale of 8.7 per cent stake to Invesco Oppenheimer in August.

ET has learned that the Subhash Chandra-promoted Essel Group recently submitted an escrow arrangement to the lenders which involved transferring the pledged shares to a separate account without disclosing the identity of the proposed buyer and the price at which it will be sold. This proposal didn’t go down well with the lenders who insisted on knowing the details.

“The company is yet to pay us and is proposing a deal which is only favourable to it,” said an official involved in the discussions. “It’s impossible for us to agree to such terms.”

The lenders, who are owed around Rs 7,000 crore by Essel group promoters, fear that the sale will happen at a sharply discounted price and that they may not be able to recover all their money.

“In its endeavour to seamlessly distribute the sale proceeds to all lenders, the Essel Group has appointed credible investment bankers to lead the divestment process,” a spokesperson for the promoters said.

“The lenders need to know the price at which the transaction is to take place. The fear is that the next sale could happen at a much lower price than the deal that happened with Invesco Oppenheimer atRs 400 per share,” said another official.

ZEE shares ended the day’s trade on the BSE at Rs 235 per share.

“Promoters of Essel Group have no control over the pricing. The investment banks have their own processes in order to get the highest possible price-point,” the spokesperson added.

In August, the promoters struck an agreement with Invesco Oppenheimer to sell up to 11 per cent for around Rs 4,224 crore at Rs 400 per share. Out of this, the promoters have managed to deliver 8.7 per cent stake.

The cash-strapped Zee promoters have around six months to come up with over Rs 7,000 crore to repay debt. Over 90 per cent of the promoter stake is already pledged, with 10.7 per cent pledged with Russia’s VTB Capital.

Last month, in an interview with ET, Punit Goenka, MD of ZEE, had said that post the fall in the share price of the company, some strategic investors, with whom the promoters were in talks earlier, had once again approached them.

“They have approached us... there is interest and it’s a subset of the same people who were in talks with us earlier,” Goenka had said. He had also added that the promoters are open to selling 10-11 per cent stake to strategic investors.