Mercator seeks to sell assets to pare debt as lenders file for insolvency proceedings

P Manoj MUMBAI | Updated on February 16, 2020

NCLT yet to admit lenders’ petitions under IBC

Fleet owner Mercator Ltd is looking to sell some of its ships to repay debt while it awaits a ruling from a bankruptcy court in Mumbai on whether the firm should be admitted to insolvency proceedings.

ICICI Bank, State Bank of India and a few operational creditors have hauled Mercator to the National Company Law Tribunal (NCLT) in Mumbai under the Insolvency and Bankruptcy Code (IBC) to recover unpaid dues.

The NCLT has not yet admitted the petitions filed against the Mumbai-listed company – once India’s second biggest private fleet owner.

“The company is defending the petitions filed with the NCLT,” Mercator said.

Loan recall

The lenders have also recalled most of the loans given to the company, leading to a re-classification of debt from long term to short term, which now stands at Rs 1,061 crore.

A loan recall means the borrower has to repay loans immediately.

Meanwhile, a customer has invoked bank guarantee for Rs 143 crore in Mercator Oil and Gas Ltd, a 100 per cent subsidiary, raising the firm’s consolidated debt to Rs 1,600 crore including working capital.

ICICI Bank has also filed a separate application with the NCLT seeking to restrain Mercator from selling its participating interest in the CB-9 (oil block), which is owned by it’s subsidiary Mercator Petroleum Ltd (MPL).

MPL has received shareholders’ approval to sell its participating interest in the oil block, which is awaiting no-objection from the lenders.

MPL, Bank of Baroda (BOB) and UTI Structured Debt Opportunities Fund - I (UTI), through Axis Trustee Services Ltd (Axis), as debenture trustees, have opposed the application of ICICI Bank on the grounds that the oil block is a secured asset of BOB and UTI in which ICICI Bank does not have any interest.

As part of the de-leveraging exercise, Mercator sold its Floating Storage and Offloading Unit (FSO) Ship - Prem Pride - for Rs 49.54 crore on January 16.

Ship sale plans

The company proposes to sell its medium range tanker Prem Mala, for which it has received shareholder’ nod. However, the vessel is under arrest from an operational creditor and a financial creditor.

Similarly, a lender has initiated for the sale of another medium range tanker, Hansa Prem, for recovery of debt. The vessel is also under arrest from an operational creditor.

This has stalled the sale of both the ships.

Mercator is also in the process of disposing of its fleet of dredgers and has instead decided to focus on an asset light model for dredging contracts, wherein the work can be accomplished by chartering dredgers.

The company said it has legal claims and receivables for Rs 1,513 crore.

For the nine months of FY20, Mercator reported a consolidated loss of Rs 656.62 crore and a standalone loss of Rs 495.16 crore.

Published on February 16, 2020

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