“Authum has transferred the requisite amounts to secure creditors and the business transaction agreement has been signed by lenders to hand over the assets to them. This brings an end to a process which began almost three years ago,” said a person familiar with the deal .
RHFL owed creditors led by Bank of Baroda a total of Rs 11,540 crore. Authum was declared the winning bidder for RHFL in June 2021. However, objections by the Securities and Exchange Board of India (SEBI) on the voting process and a stay on the distribution of funds due to a case filed by the Shapoorji Pallonji Group had delayed theimplementation of the plan.
However the delay benefitted lenders because loan recoveries in RHFL over the period have swelled to more than Rs 3000 crore from Rs 1600 crore at the time the letter on intent was issued. As a result lenders could increase their recovery.
“The total value of the resolution plan is now Rs 3351 crore. Authum has also increased the amount it will infuse into the company from what was envisaged earlier and will now put about Rs 351 crore into the RHFL,” said the person cited above.
The increase in the final amount means secured creditors have now recovered about 29% of their dues up from 26% envisaged in the initial plan.
“Authum has also kept aside some money to pay for dissenting creditors and other liabilities of the company,” said a second person aware of the transaction. On March 3, the Supreme Court had given the go ahead to implement the plan, while allowing dissenting debenture holders (DHs) the option to accept the terms of the resolution plan or pursue other legal remedies to recover their dues.
Authum had completed the takeover of another Anil Ambani company Reliance Commercial Finance in October. But the RHFL deal is bigger both in terms of dues and also the number of creditors.
A total of 30 banks led by Bank of Baroda, 40 institutional investors including mutual funds and 20,000 retail investors including HNIs who were approved creditors of RHFL. Small investors with investments below Rs 5 lakh, received 100% of their principal amount versus 23% for investors above that number, according to the approved plan.
The RHFL resolution is also the largest outside the NCLT, bigger than Altico Capital’s Rs 4000 crore debt settled in March 2020 and Religare Finvest’s Rs 5344 crore debt settled in March this year. It was the only other financial services company from the Anil Ambani group to be listed besides Reliance Capital.
BoB Capital Markets, the investment banking arm of BoB, and consultancy firm EY were process advisors to lenders while J Sagar Associates was the legal advisor.
Lenders are relieved with the completion of this deal even as they struggle to attract bidders for the holding of bankrupt Reliance Capital. Earlier this week ET reported that lenders fear their loan recovery could fall below the liquidation value of Rs 12,500-13,000 crore for the financial services company since bidders, are reluctant to improve their offers.