Debt Tribunal clears decks for $218 mn Orchid-Hospira deal

BS :Gireesh Babu  |  Chennai  

 June 19, 2014

During the hearing, ING Vysya Bank has argued Orchid had to pay around Rs 44 crore to the bank given to the latter for the working capital, which the company had used for long-term purpose

The Debt Recovery Tribunal (DRT) in Chennai cleared the decks for Orchid Pharma to transfer its pencillin and penems API business along with some facilities to the US-basedHospira over a $200 million deal which was announced in August, 2012.

The DRT 1, Chennai, vacated a stay on the Business Transfer Agreement (BTA) between the companies, which was issued almost an year ago in favour of one of ING Vysya Bank, a lender to Orchid Pharma.

Sources close to the development confirmed the order and said the tribunal had pronounced the order on Tuesday.

During the hearing, ING Vysya Bank has argued Orchid had to pay around Rs 44 crore to the bank given to the latter for the working capital, which the company had used for long-term purpose. The Bank said that its accounts should be settled before implementing any agreement.

The bank also said it had opposed the corporate debt restructuring (CDR) package, as it would not receive the actual amount in its implementation.

However, Orchid Pharma argued the CDR proposal was duly accepted by the CDR Empowered Group, and according to which, its creditors, around 22 banks, would be getting a portion of the money they had lent while all of them were sacrificing a part of it, as it is required for the company's revival and payment of debt.

Orchid had argued 22 banks were involved in the CDR and the creditors were sacrificing Rs 364 crore, mostly the interest on credit.

The proposed BTA, which is now a part of the CDR procedure, has been into litigation as some of the debtors and shareholders of the company.

Also, Orchid's dispute with its largest shareholder group, billionaire investor Cyrus Poonawalla and his firms, including the biotech firm Serum Institute, was recently heard in the Chennai Bench of Company Law Board (CLB).

Orchid Pharma also received a favourable order from the CLB, which refused to issue a stay on implementation of its corporate debt restructuring (CDR) programme.

The investor and his group, together holding around 14 per cent stake in the company, has alleged that certain acts of oppression and mismanagement in the affairs of Orchid Pharma.

They have also argued against the BTA, during the hearing in CLB.

The Business Transfer Agreement (BTA) between Orchid Chemicals and Pharmaceuticals Ltd and Hospira Health care (India) Pvt Ltd was signed in August, 2012, according to which Hospira agreed to buy the formers' facility in Aurangabad and affiliated facilities for over $200 million (which later increased to $218 million).

Orchid Pharma, which has been reeling under debt for the past few years, has around Rs 3,500 crore, according to recent reports.

According to earlier reports, the CDR scheme includes the sale of Orchid Pharma's penecillin and penems API business together with its manufacturing facilities at Aurangabad, Maharashtra and associated R&D facility at Sholinganallur, Chennai for a cash consideration of about Rs 1348 crore to Hospira.

 It also include repayment of a portion, Rs 681 crore, of the total debt to lenders out of the sale proceeds and restructuring of the balance debt of Rs 2866 crore. 

Around Rs 430 crore from the sale proceeds for meeting the working capital requirements of the company. The restructured debt together with funded loans would have to be repaid over a period of 8 years starting from April 2015 subject to regulatory approvals.

Infra finance companies can raise long-term funds

IANS  |  New Delhi  

June 19, 2014 

The government has permitted infrastructure finance companies to issue secured debentures with a tenure of up to 30 years.

India is estimated to require investment of about $1 trillion in infrastructure during 2012-17. The decision will facilitate flow of long-term funds for the infrastructure sector.

Also, infrastructure debt fund non-banking financial companies (ID-NBFCs) have been allowed to issue secured debentures for up to 30 years.

"Similarly, housing finance companies have been allowed relaxed terms for maintaining debenture redemption reserve on lines similar to NBFCs registered with RBI (Reserve Bank of India). Necessary amendments in rules have been notified," the Corporate Affairs Ministry said in a statement Thursday.

The ministry also said that companies can appoint an independent merchant banker with a minimum experience of 10 years and registered with the market regulator to prepare valuation reports required before making a preferential allotment of shares.

RBI directs banks to show sector-wise advances from FY15

Financial ExpressThursday, June 19, 2014

RBI Asks Sectorwise Credit Position

The Reserve Bank of India (RBI) on Wednesday directed banks to disclose sector-wise advances in the ‘Notes to Accounts’ section in their financial statements from the financial year 2014-15 onwards. To enhance transparency, the RBI in March 2010 had said that banks should disclose sector-wise non-performing assets (NPAs), movement of NPAs, overseas assets and revenue, and other special purpose vehicles sponsored by banks.

During the bi-monthly policy announcement on April 1, RBI governor Raguram Rajan had proposed banks prescribe certain additional disclosure requirements in the financial statements by end-June 2014 as per the recommendations of the Nachiket Mor committee to actively manage their exposures to various sectors, including priority sector.

The RBI has been taking active steps for the early recognition of NPAs in the system and is also seeking to enhance transparency within banks to push for more prudent lending. The RBI also asked banks to classify accounts based on the number of days their interest payments are pending known as Special Mention Accounts (SMA).

According to RBI guidelines, the SMA classification is where repayment is overdue for up to 30 days, SMA-1 where repayments are overdue between 31 to 60 days, and SMA-2 where repayments are overdue between 61 and 90 days.

According to data from Capitaline, at the end of March 2014, loans of R2,50,715 crore were non-performing in the banking system. The central bank has also directed banks to provide credit information regarding their exposures above R5 crore to the Central Repository of Information on Large Credits (CRILIC). As soon as an account is classified under SMA-2, banks have to form a lenders’ committee called Joint Lenders’ Forum (JLF) to evaluate the asset and work towards early resolution of stress in the account.

On a rough reckoning, loans that are not being serviced on time at four public sector banks are estimated at around R66,000 crore. For example, at Bank of Baroda SMA-2 accounts are estimated at close to R18,000 crore, or 4.53%, of its total advances while at Bank of India (BoI), the exposure to SMA-2 accounts is approximately 5% of its total loan book or R18,000 crore.