Creditors of the thermal power company, which is in corporate insolvency, have invited three restructuring candidates – Adani Power, Reliance Industries and the Power Finance Corporation-REC team – to bid in the auction.
Both corporate houses told restructuring specialist Lanco that the proposed “challenge mechanism” violated the rules governing the Insolvency and Bankruptcy Code (IBC) as there was no provision for it in the relevant legislation, said one of the people quoted earlier. above.
The so-called “challenge mechanism” is an auction process involving several rounds of bidding between bidders until the highest bidder is identified. It was to be the first time two of the country’s biggest conglomerates – Reliance, owned by Mukesh Ambani, and Gautam Adani’s Adani Power – would compete directly for an asset.
PFC-REC owns 41% of the share’s debt
Spokespeople for Adani Power and Reliance Industries, led by Asia’s two richest billionaires, did not respond to ET’s request for comments.
The third bidder – the PFC-REC team – offered Rs 3,020 crore as upfront cash payment in Wednesday’s auction, the people said. The PFC-REC combination also holds 41% of the debt in Lanco Amarkantak, giving it a bigger say in the resolution process.
At the 48th meeting of the Committee of Creditors (CoC) held in October, the creditors decided to conduct a closing bidding process. As a result, all three restructuring bidders – Adani, Reliance and the PFE-REC team – were asked to submit respective improved offers to the initial ones made in August. According to the bidding closing process, the highest bid among the three bidders will be declared as H1 (Highest Bidder).
In the second round (at closing of bidding), Adani Power gave the highest bid of Rs 950 crore in advance payment.
Reliance has offered to pay Rs 2,103 crore upfront, while PFC-REC has offered Rs 5,521 crore, of which Rs 4,149 crore is deferred payment over 22 years.
At the 51st CoC meeting, held after the enhanced offers were disclosed to member banks, the lenders decided to hold a ‘challenge mechanism’ auction. This change was introduced at a late stage in the clearance process by the CoC, which was opposed by the two business houses, said the first person quoted above.
“Firstly, a new process (challenge mechanism) was put in place following the initial decision that a ‘bid closing’ process would identify the highest bidder. Second, there is no provision for auction under the IBC,” said the same person. “It is very likely that either the two business houses or one of the two will seek legal protection.” Legal experts said the PFC-REC merger has a conflict of interest as it is both a restructuring candidate and the largest debt holder. According to the IBC, at least 66% of creditors (by value of debt) must agree to approve any resolution. This means that a creditor with 34% or more can block a decision.
Saurabh Kumar Tikmani, the restructuring professional backed by KPMG, has admitted claims worth Rs 14,632 crore from 17 creditors.
Lanco operates a coal-based thermal power project on the Korba-Champa state highway in Chhattisgarh. It has commissioned the first phase, comprising two units of 300 megawatt (MW) each, which supply electricity to Madhya Pradesh, Haryana and the home state.