With an ₹860 crore VOVL bid, NARCL eyes the single-largest debt buyout by any ARC

Lenders are in advanced negotiations with the government-promoted bad bank to sell the debt of Videocon-promoted VOVL, among the largest distressed loans on their books.

Last week, the National Asset Reconstruction Company Ltd (NARCL) made a binding bid of ₹860 crore to acquire the debt of oil and gas exploration company VOVL, said two people aware of the development. Lenders of VOVL will ask NARCL to improve the offer since it is much lower than proposals from other bidders.

15% to be Paid Upfront in Cash

“Once this deal closes, it will be marked as the largest single debt acquisition by any ARC to date,” said one of the lenders. VOVL Ltd, undergoing corporate insolvency, has verified financial claims of Rs 30,640 crore.

NARCL’s offer has an 15:85 structure – 15% of the consideration will be upfront cash while the balance will be in security receipts (SRs) payable over five years.

Although the government guarantees these SRs, the overall offer is as low as 3% of the financial creditors’ claims.

NARCL did not respond to ET’s queries.

VOVL’s resolution professional Pravin Navandar received four resolution plans in September from Eneva Brazil, Twin Star Overseas, RKG Fund and Petro Rio SA.

Oil exploration company Eneva Brazil has offered Rs 2,800 crore, which equates to 9% of the financial creditors’ claims, as reported by ET on September 28. Twin Star Overseas, owned by billionaire Anil Agarwal of Vedanta, offered Rs 1,200 crore, which is about 4% of the claim amount. RKG Fund-1, owned by Prudent Asset Reconstruction Co., proposed a Rs 1,000 crore plan, while Petro Rio SA offered Rs 160 crore.

Bids from Brazil-based oil explorers Eneva Brazil and Petro Rio SA are for specific oil blocks.

Twin Star’s Offer

The resolution of VOVL’s affiliate Videocon Industries is in limbo after lenders decided to restart the sale process. The Supreme Court stayed it a year ago following a petition by winning bidder Twin Star Technologies.

Twin Star’s offer, equating to 5% of the claim amount, was at the heart of the dispute related to Videocon Industries. Lenders are worried the same issue – too low a bid – will crop up for VOVL.

Since NARCL’s offer is significantly lower than those received from others under the insolvency proceedings, the banks’ boards may not approve it unless the amount is increased, said the lender cited above.

If the boards of all banks approve NARCL’s offer, the lenders will hold a Swiss challenge auction inviting counter bids from other asset reconstruction companies. NARCL will have the first right to match the counteroffer if any.

In the past few months, NARCL has made binding offers for half a dozen companies, triggering Swiss Challenge auctions. These include Jaypee Infratech, Mittal Corp, Meenakshi Energy, SSA International, Consolidated Construction Company Ltd and Helios Photo Voltaic Ltd.

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