Sintex Industries lenders plan Swiss auction to avoid liquidation

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SA lenders can hold a Swiss challenge auction or an inter-se tender if candidates for resolution of the bankrupt textile company do not significantly improve their bids, two people familiar with the law said. question.

The auction route will be undertaken primarily to secure improved bids to avoid the company going into liquidation as the bids from all four bidders are below liquidation value, they said.

The team at Reliance Industries – Assets Care & Reconstruction Enterprise (ACRE), a Welspun entity,

Ventures and Ltd submitted resolution plans last month.

In a Swiss auction, the highest bidder will have the right to match a counterbid received by the PR. As part of the inter-se bidding process, each party has the opportunity to increase their bid in each successive round until the highest bidder emerges.

ET reported on Jan. 11 that resolution professional Pinakin Shah, who received the highest bid from the Reliance-Acre team, had asked bidders to submit enhanced unconditional bids. The four resolution candidates have yet to submit a revised resolution plan to the PR, the sources said.

According to the plan currently submitted to the PR, the Reliance Industries-ACRE team has offered Rs 2363 crore which includes Rs 2280 crore to financial creditors and the rest to trade creditors and employees. In addition to this, they also offer 10% equity to financial creditors and Rs 500 crore for working capital requirements.

ACRE is an asset reconstruction company backed by Ares SSG Capital.

Welspun’s Easygo Textile has offered Rs 2300 crore to financial creditors, of which Rs 2200 crore is for financial creditors and the rest is for trade creditors and employees.

Himatsingka Ventures’ resolution plan is Rs 2,210 crore of which Rs 2,200 crore is for financial creditors while GHCL’s plans are of Rs 2,040 crore of which Rs 2,000 crore is for financial creditors, the same person said.

RIL, ACRE, Welspun Group, Himatsingka Ventures, GHCL did not respond to questions. The PR in an email response said he could not divulge confidential information.

There have been precedents where lenders have used Swiss challenge auctions for – Ruchi Soya and Dighi Port – to secure improved offers. Both were companies undergoing insolvency proceedings in which the lenders were successful in obtaining improved offers.

“Only if the deals are not substantially improved will lenders consider the auction route instead of voting for liquidation,” one of the people said. The PR admitted Rs 7,534.6 crore of claims from 27 financial creditors.

Sintex Industries has been admitted to the insolvency process by Invesco Asset Management after the company defaulted on its obligation to pay Rs 15.4 crore on principal and interest on non-convertible debentures.

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