Edelweiss Asset Reconstruction Co Ltd (EARC) has sold debt of ₹2,059.24 crore along with 11 per cent equity it held in Karaikal Port Pvt Ltd to Omkara Assets Reconstruction Pvt Ltd for ₹1,500 crore, setting the stage for Adani Ports and Special Economic Zone Ltd (APSEZ) to acquire the port located in Puducherry.

The deal translates into a haircut of about 27 per cent.

Edelweiss ARC ran a so-called ‘Swiss Challenge’ method to sell the debt that was originally assigned to it by nine lenders of the port operating company, including Indian Overseas Bank, Indian Bank, Punjab National Bank, Oriental Bank of Commerce, United Bank of India, Central Bank of India, Syndicate Bank, Allahabad Bank and India Infrastructure Finance Company Ltd.

Court cases

GRK Reddy, the promoter of Marg Ltd, which operates the port, had challenged the Swiss Challenge process first in the Madras High Court and then in the Supreme Court.

The Supreme Court permitted Reddy to file a review petition in the Madras High Court against the earlier order, which he did but lost.

Marg promoter GRK Reddy put legal spokes in Adani’s plan to buy Karaikal Port

BusinessLine understands that Reddy has again moved the Supreme Court against the Madras High Court order on which the hearing is yet to take place.

Sources with knowledge of the matter said that Edelweiss ARC has assigned the debt to Omkara ARC instead of waiting “endlessly”.

Pressure to sell debt

Edelweiss ARC has come under pressure to sell the debt as the restructuring of the loan assigned by the original lenders to the ARC has to be completed within 8 years which ends in July 2023.

Marg Ltd holds 45 per cent stake in Karaikal Port Pvt Ltd while four private equity funds — Ascent Capital Advisors India Pvt Ltd, Jacob Ballas Capital India Pvt Ltd, Affirma Capital India and GIP India — together hold 44 per cent stake.

Karaikal Port debt restructuring: Edelweiss ARC opts for Swiss challenge

Edelweiss ARC launched the Swiss challenge auction for Karaikal Port’s debt based on an offer from Omkara ARC, which is understood to have the backing of APSEZ.

Only banks, financial institutions and asset reconstruction companies can participate in the auction for take-over of debt of a non-performing asset, according to the SARFAESI Act and the guidelines issued by the Reserve Bank of India (RBI).

Corporates such as APSEZ, though, can come in through an arrangement with banks, financial institutions and asset reconstruction companies.

The Swiss Challenge auction failed to receive any counter bids when the deadline ended on October 14.

Karaikal Port Pvt Ltd runs the all-weather port developed on a Build, Operate and Transfer (BOT) format under the public private partnership (PPP) mode on a 30-year concession awarded by the Puducherry government. The port started operations in June 2009.

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