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Lender Edelweiss turns bidder for shipbuilder Bharati Defence

P Manoj Mumbai | Updated on May 15, 2018 Published on May 15, 2018

Bid approved by Committee of Creditors

Edelweiss Asset Reconstruction Co Ltd, which holds close to 80 per cent of the debt of Bharati Defence and Infrastructure, has submitted a bid to buy the ailing shipbuilder under the Insolvency and Bankruptcy Code (IBC).

This makes it the first such case of a lender putting in a bid for a company that owes it money.

The bid, including the resolution plan submitted by Edelweiss ARC, was approved by the Committee of Creditors, which mainly comprises Edelweiss.

The financial bid of Edelweiss was higher than the liquidation value, which, in effect, was also set by Edelweiss.

Experts say it is technically possible for financial creditors/lenders to submit a bid for a company that owes it money.

“There is nothing in the IBC that prevents a lender from submitting a bid and a resolution plan for a company that owes money to it,” said a lawyer who tracks insolvency cases. Technically, this is a possibility, banks can takeover the assets; and, to help its case, genuine efforts were made by Edelweiss, said the lawyer, asking not to be named.

“It is possible because all efforts have been made towards a resolution by seeking resolution applicants which, due to external factors in the ship-building business, did not happen/materialise. Now, rather than getting into liquidation, Edelweiss has offered more than the liquidation value,” he said.

“External parties were also interested in breaking up the company, which is as good as liquidation. If you have five-six parts in the company and if everybody wants only one or two parts, that means you are giving it to three or four owners. Having said that, various options were evaluated. That’s when Edelweiss decided to put in a bid/resolution plan by itself,” the lawyer said.

Vijay Kumar and PC Kapoor, the former promoters of Bharati Defence, the operational creditors and workers of the shipyard, have filed an intervener application with the National Company Law Tribunal (NCLT) seeking its approval to reject the resolution plan submitted by Edelweiss ARC.

Published on May 15, 2018
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