· In Mar’20 Yes bank announced that it is writing off its Additional Tier 1 bonds worth ~Rs.8400cr as per the restructuring package approved by RBI. This decision was met by a strong backlash raising concerns about the move hurting retail investors, mostly retirees.
· Bondholders then filed several pleas with various high courts including Bombay and Delhi High Court. This includes the plea filed in Mar’20 by the bondholders with Bombay HC to attain an interim relief worth Rs.160cr.
· In Sep’20, Yes Bank moved to the top court seeking transfer of the petitions pending before various high courts and consumer forum to the Bombay High Court.
· When bondholders moved to the Supreme Court, the court has refused to entertain any pleas in the matter stating that the pleas should be filed in respective high courts.
· In Mar’21, Bombay High Court admitted the plea pertaining to an interim relief of Rs.160cr and has ordered the RBI and SEBI to submit their replies before the next hearing which is due on 26th Apr’21.
· While the RBI argued that the write off was declared in order to protect the interest of depositors, SEBI fined the bank with Rs.25cr for allegedly mis-selling these bonds by representing them as ‘Super FDs’ at the time of sale. Yes Bank however, said that it will move to the Securities Appellate Tribunal to oppose the fine.
Lakshmi Vilas Bank:
· In Nov’20, Lakshmi Vilas Bank announced that it has written down in full its Basel III tier 2 securities worth Rs.318cr because the RBI has deemed the bank to be nonviable or approaching nonviability. This announcement was made right before LVB’s merger with DBS Bank. This move has set a precedence as it is the first time that a tier 2 bond is being written off.
· Apart from the bonds, the central government had written off entire amount of the paid-up share capital and reserves and surplus of LVB, including the balances in the shares or securities premium account and the delisting of the shares and debentures. Due to this, the shareholders will not be compensated for their shares.
· In Dec’20, bondholders filed a petition with Madra High Court. A bunch of elderly bondholders additionally petitioned the Indian Finance Minister Nirmala Sitharaman to intervene on the matter.
· In Dec’20, bondholders approached the Chief Justice of India to take suo motu notice after the write-off of their holdings. In another appeal to the RBI, the IDBI Trusteeship has asked the RBI to reconsider its decision to write-off these bonds. As of now, no compensation has been announced for the bondholders in this matter.
· In Sep’18, IL&FS defaulted on the servicing of its commercial paper borrowing, loan from banks, inter corporate deposits worth Rs.3794.9cr. According to exchange filings, it defaulted on another Rs.130cr between 5th and 16th Oct’18. Post this the group’s lending arm IL&FS Financial Services was barred from borrowing by way of commercial papers until Feb’19.
· The company’s total debt stood at Rs.91000cr as on Oct’18. On 22nd Oct, IL&FS said it has appointed two financial advisers, Arpwood Capital and JM Financial Consultants to conduct a valuations exercise of its assets. Once this was done the board would draw up a list of assets to dispose in order to generate funds for repayment. At first, when these plans were outlined by the company, they seemed credible however, the company failed to take an action in time.
· Therefore, NCLT invoked its powers and granted the interim prayer of suspending the existing Board of Directors and reconstituting the same with the six persons proposed by the Centre. The NCLT further restrained the suspended members of the Board from alienating their personal assets.
· In order to ensure a period of calm during the resolution process, a moratorium was sought for IL&FS and its group companies against certain creditor actions. The Central Government filed a petition before the NCLT, seeking re-opening of the books of account of IL&FS and its group companies for the past five financial years. The NCLT vide its judgment dated 1st Jan’19, allowed this petition.
· By its order dated 2nd May’19, NCLAT allowed the banks to declare as non-performing assets the accounts of IL&FS and its group companies that have defaulted on payments. However, the tribunal clarified that the banks cannot initiate the recovery process and debit money.
· On June 4, the Supreme Court allowed the SFIO to reopen and recast accounts of IL&FS and two of its subsidiary companies for the last five years.
· As per the company’s statement in Oct’20, IL&FS Board is hopeful that it will be able to address the targeted debt of over Rs 50,000 crore in the FY21 despite the impact of the pandemic.
· The ripple effect of IL&FS default harmed DHFL’s ability to borrow funds via commercial papers. To add to the trouble – the NBFC was also reeling under high NPAs and was hit by a series of allegations of financial mismanagement, including siphoning of funds by promoters.
· On 4th Jun’19, DHFL defaulted on Rs.900cr worth of due payments and the NBFC was downgraded immediately after. Allegations of dubious financial transactions continued to emerge against Kapil Wadhawan (the then Chairman and MD) and Dheeraj Wadhawan (then a non-executive director).
· On November 29th 2019, the RBI initiated insolvency proceedings against DHFL – the first NBFC to undergo a corporate insolvency resolution process (CIRP) under recently released Government guidelines for the same. A few days earlier, the Central Bank had also removed its Board of Directors citing inadequate governance.
· In order to acquire a fully-functional housing finance company (HFC) with 570 branches, 2,179 permanent employees and a strong presence in tier 2 and tier 3 cities, where a real estate boom is expected to take place in the near-term, several bidders participated. Up to Jan’21, there have been 4 rounds of bidding with the last round ending in Dec’20.
· The auditor for debt-ridden Dewan Housing Finance Ltd (DHFL) has said that it has detected fraudulent transactions worth Rs 2,150.84 crores. Mortgage lender DHFL, on October 6, 2020, said that the fraud had been committed, by undervaluing the company’s insurance subsidiary.
· On January 15, 2021, Piramal Group won the bid to take over the bankrupt mortgage lender, receiving over 94% votes for its resolution plan from DHFL’s creditors. Piramal’s bid of Rs 32,250 crores for DHFL included a higher upfront payment to creditors and infusion of equity. The resolution proposal will now be put before the NCLT.
· During 2017, both RCom and RInfra committed defaults in repayment. The accounts were declared as non-performing account (NPA) by SBI with effect from 26 August 2016 pursuant to the risk-based supervision during the year 2017. In Aug’20, Anil Ambani provided personal guarantees for borrowings of Anil Dhirubhai Ambani (ADA) group of companies from Industrial and Commercial Bank of China Ltd, China Development Bank and Exim Bank of China. This was done without the consent of SBI.
· Three State-run lenders, State Bank of India (SBI), Union Bank of India (UBI) and Indian Overseas Bank (IOB), have classified accounts of the Anil Ambani owned Reliance Communication Ltd (RCom) and its two units Reliance Telecom Ltd (RTel) and Reliance Infratel Ltd (RInfra) as fraudulent.
· Reliance Anil Dhirubhai Ambani Group firm Reliance Power then defaulted on repayments to Axis Bank, Yes Bank and Lakshmi Vilas Bank (LVB) due on January 31, 2020. As per regulatory disclosures, the company has defaulted on repaying Rs 78 lakh to Axis Bank, Rs 1.09 crore to Yes Bank and Rs 1.25 crore to LVB.
· By Dec’20, the resolution professional for RCom has accepted claims worth Rs49,224 crore from 53 creditors, including banks, NBFCs and mutual funds.
· According to RCom statement, the resolution plans unanimously agreed by the lenders are at various stages of approval before the NCLT, and on implementation thereof, the lenders are likely to recover at least 70% of their dues, with potential subsequent upside.
· In Feb’21, another Anil Ambani owned company Reliance Home Finance Ltd (RHFL) defaulted on loan of over Rs 40 crore from Punjab & Sind Bank even as the company has enough cash and cash equivalent which it cannot use due to a court order.
· In Mar’21, Reliance Capital has once again failed to make interest payment for non-convertible debentures (NCDs) due on March 28 and March 29, 2021. With this default, the non-bank lender has failed to make payment to bondholders at least 50 times in FY21.
· In Aug’20, Future group announced the take over of its retail and wholesale business by Reliance Industries Ltd. However, this is being challenged by Amazon. Both Amazon and Reliance are involved in a legal battle pertaining to the take-over.
· Post the announcement of take-over in Aug’20, Future group has defaulted on interest payment of NCDs due to Franklin Templeton Mutual Fund.
· In Sep’20, Future Group firm Future Consumer Ltd (FCL) stated that it has defaulted on payment of principal redemption and interest on NCDs. The current default amount at this time includes principal of Rs 20 crore and interest of Rs 2.03 crore, payable annually.
· In Apr’21, Future Enterprises has defaulted on payment of interest on NCDs. The companies statement said ‘The company is unable to service its obligations in respect of the interest on NCDs due on April 12, 2021. Gross principal amount on which the default has occurred is Rs 300 crore and interest payable was Rs 15,16,48,248’.
· In Apr’21, Future Retail’s lenders agreed to restructure its debt under parameters set by the RBI, allowing the cash-strapped company to defer repayment by two years. However, lenders are hopeful that a transaction with Reliance Industries Ltd will eventually take place, allowing them to recover their dues in full.
· RBI has allowed banks six months to implement a resolution plan, once they invoke a recast under its 6 August 2020 circular. The panel will vet all resolution plans of ₹1,500 crore and above.
· The recast also involves an interest moratorium between 1 March 2020 and 30 September 2021. Interest during this period will be converted into a funded interest term loan (FITL), payable by December 2021. All penal interest and charges, default premiums, processing fees unpaid since March 2020 till implementation will be fully waived.
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