Lenders of distressed energy explorer VOVL are reportedly in advanced discussions with the National Asset Reconstruction Company Ltd (NARCL) to sell the debt of the oil and gas exploration company of Videocon Industries. As per a report, the debt of Videocon-promoted VOVL is one of the largest distressed loans on the lenders’ books.
According to a report by The Economic Times, a binding bid of Rs 860 crores was made last week by NARCL to purchase the debt of VOVL. However, VOVL's lenders will reportedly urge NARCL to raise the bid since it is significantly less than the proposal made by the other bidders.
“Once this deal closes, it will be marked as the largest single debt acquisition by any ARC to date,” The Economic Times quoted one of the lenders as saying.
The structure of the NARCL offer is reportedly 15:85, with 15 per cent of the consideration being paid in cash upfront and the remaining 85 per cent being paid in security receipts (SRs) payable over a five-year period. Even though these SRs are backed by the government, the overall offer is only 3 per cent of the financial creditors' claims.
Pravin Navandar, a VOVL resolution specialist reportedly received four resolution proposals from Eneva Brazil, Twin Star Overseas, RKG Fund, and Petro Rio SA in September. The report further added that Eneva Brazil has offered Rs 2,800 crore, which equates to 9 per cent of the financial creditors’ claims, while Vedanta billionaire Anil Agarwal's Twin Star Overseas offered Rs 1,200 crore or around 4 per cent of the claim amount. Additionally, Petro Rio SA provided Rs 160 crore, while RKG Fund-1, owned by Prudent Asset Reconstruction Co., put out a plan worth Rs 1,000 crore.
As per the report, the bank's boards might not approve NARCL's offer since it is relatively low as compared to others. The report further added that if the proposal is accepted by the boards of all the banks, the lenders will stage a Swiss challenge auction where other asset reconstruction firms may submit counterbids. However, if there is a counteroffer, NARCL will have the first opportunity to match it.