McLeod Russel leaves IBC after settlement with financial creditor
Williamson Magor Group firm McLeod Russel, billed as the nation’s largest loose tea producer, has managed to emerge from the clutches of insolvency following a settlement with financial creditor Techno Electric & Engineering.
According to Kanchan Dutta, the interim resolution professional appointed by the New Delhi bench of the National Company Law Tribunal (NCLT) to review the company’s insolvency proceedings on Saturday confirmed that the order admitting acceptance of the withdrawal of the application under Article 12A of the IBC by McLeod Russel was delivered in open court in the presence of both parties.
“Yes, it (the withdrawal of the application under Article 12A of the IBC) was delivered in open court in the presence of both parties, however, the written order has not yet been uploaded to the NCLT site, ”Datta said. Activity area.
McLeod, which operates 33 tea plantations in Assam and West Bengal and produces nearly 73 million kg of tea each year, has been the subject of insolvency proceedings by Techno Electric & Engineering for a business-to-business filing of 100 crore provided in 2018.
NCLT’s New Delhi bench in August this year admitted a claim against McLeod Russel under the Insolvency and Bankruptcy Code (IBC) for default on the loan and appointed Kanchan Dutta as an interim resolution professional. .
The funds were given to repay loans relating to four of its plantations, which were owed to banks and financial institutions, and to ensure that all charges created on the four tea plantations were discharged.
The loan amount, which bore interest at 14%, was to be fully repaid by March 31, 2019.
In its request, Techno Electric said McLeod failed to deliver the original title deeds to the four tea plantations to the company and could not repay the full loan amount on time.
Although the finer outlines of the settlement were not available, sources said much of the 100 crore loan has been repaid by the Khaitans and the rest will also be settled “soon”. Sources close to the development have also suggested that PP Gupta, chief executive of Techno Electric, may have been offered a minority stake in McLeod.
This decision is important because it would allow McLeod to pursue the debt resolution plan with the banks.
Based on the 2019 circular issued by the Reserve Bank of India, lenders have initiated the process of resolving stressed assets. They also commissioned an independent professional to carry out a Techno-economic Viability study (TEV). In addition, the lender instructed SBI Capital Markets to develop and recommend a resolution plan and possible action plan in this matter.
A draft resolution plan is pending before the lenders for review.
In its notes to the accounts accompanying the financial results for the quarter ended March 31, 2021, the management of the company expressed confidence that with the support of the lenders in the debt restructuring, the related cost reductions and the other measures taken. , it would be able to reduce its outstandings. of the loan to receive and generate sufficient cash flow to meet its obligations and strengthen its financial position over a period of time.
According to industry sources, McLeod could use a combination of approaches, including a “partial sale of assets” and restructuring of the outstanding loan to weather the crisis.
As of March 31, 2020, the company’s total indebtedness was approximately 2,245 crore, according to information available in the latest annual report (2019-20).