Reliance Commercial Finance's debt resolution plan put forth by Authum Investment & Infrastructure is expected to reduce Reliance Capital's consolidated debt by more than Rs 10,000 crore.
Non-banking financial company Authum Investment's resolution plan for debt-ridden Reliance Commercial Finance was approved with a 99 per cent majority on Thursday, sources aware of the development informed Outlook Business. While inter-creditor agreement (ICA) lenders had approved the resolution plan on July 15, it was approved by debenture shareholders on Thursday.
Outlook Business has been informed that the proposed plan would lead to 100 per cent recovery for debenture holders of the Reliance Capital subsidiary. It is expected to reduce the consolidated debt of Reliance Capital by more than Rs 10,000 crore.
"Lenders are relieved that finally the plan has been put to vote and has been approved with an overwhelming majority. Early implementation of the plan will now ensure significant recoveries to the lenders," the source stated.
The resolution plan which was initially approved by the ICA lenders required prerequisite approval from the non-ICA lenders. The delay was on account of the confusion caused by the markets regulator SEBI's recent circular on voting by debenture holders.
People aware of the development informed Outlook Business that SEBI's recent circular emerged as a cause of concern for debenture holds for it impedes on basic contractual rights put forth in the debenture trust needs. "In addition to the provisions of the circular being impractical and unimplementable, such a circular when applied retrospectively has far larger adverse implications on ongoing debt resolutions," the source said.
Back in July, non-banking financial company Authum Infrastructure and Investment's Rs 1,585 crore bid was declared the winning bid with an 80 per cent majority. The fifteen-year-old NBFC has a net worth of Rs 2,400 crore, as of June 30, 2021. Reliance Commercial Finance's total debt is Rs 9,000 crore.
"Lenders recovery is high as Rs 1,240 crore of cash has already been distributed and the Company had additional cash and cash equivalent of over Rs 250 crore as on 30 June 2021, which will be distributed along with plan proceeds," the source informed.
On Thursday, shares of Reliance Capital closed 4.85 per cent higher at Rs 14.05 apiece on the BSE. It closed 4.85 per cent higher at Rs 14.05 apiece on the NSE.