McLeod Russel out of IBC after settling with financial creditor – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/economy/agri-business/mcleod-russel-comes-out-of-insolvency-after-settlement-with-tech-electric/article36289049.ece?homepage=true

WIDE

Sources say Khaitans paid off a major part of a ₹100-cr loan from Techno Electric & Engg

The Williamson Magor Group firm, McLeod Russel, touted to be the country’s largest bulk tea producer, has managed to successfully come out of the clutches of insolvency following a settlement with the financial creditor Techno Electric & Engineering.

“Yes, it (the withdrawal of application under Section 12 A of IBC) was pronounced in open court in presence of both the parties, however, the written order has not yet been uploaded in the NCLT site,” Datta told BusinessLine.

McLeod, which operates 33 tea estates in Assam and West Bengal and produces close to 73 million kg of tea each year, was dragged to insolvency proceedings by Techno Electric & Engineering over an inter-corporate deposit of ₹100 crore provided in 2018.

The New Delhi bench of NCLT had, in August this year, admitted an application against McLeod Russel under the Insolvency and Bankruptcy Code (IBC) for defaulting on the repayment of the loan and had appointed Kanchan Dutta as interim resolution professional.

The funds were given to repay loans relating to four of its estates, which was due to banks and financial institutions and to ensure that all encumbrances created on the four tea estates were released.

The loan amount, which carried interest of 14 per cent, was to be fully repaid on or before March 31, 2019.

In its application, Techno Electric said that McLeod failed to hand over the original title deeds relating to the four tea estates to the company and could not repay the entire loan amount within the due date.

While the finer contours of the settlement was not available but sources said that a major part of the ₹100 crore loan was paid off by Khaitans and the remaining would also be settled “soon”. Sources close to the development also suggested that P P Gupta, MD of Techno Electric, may have been offered a minority stake in McLeod.

Resolution plan

The move is significant as it would allow McLeod to pursue the debt resolution plan with banks.

Based on 2019 circular issued by the Reserve Bank of India, the lenders have initiated the resolution process of stressed assets. They have also appointed an independent professional for carrying out a Techno-Economic Viability (TEV) study. Further, the lender appointed SBI Capital Markets to work out and recommend a resolution plan and a possible course of action on the matter.

A draft resolution plan is pending before lenders for their consideration.

In its notes to accounts accompanying the financial results for the quarter ended March 31, 2021, the company’s management had expressed confidence that with the lenders support in restructuring debt, related cost reductions and other measures taken, it would be able to reduce its outstanding amount of loan receivable and generate sufficient cash flow to meet its obligations and strengthen its financial position over a period of time.

According to industry sources, McLeod may use a combination of approaches, including “partial sale of estates” and restructuring the outstanding loan to tide over the crisis.

As on March 31, 2020, the company’s total indebtedness stood at around ₹2,245 crore, as per information available in the last annual report (2019-20).

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