Lenders face a dilemma because restarting the process could not only delay resolution, but there could be uncertainty whether bidders would make better offers, one of the people quoted said.
At the same time, if all four plans go to a vote, a majority could vote below liquidation value, the same person said. Indeed, the dissident creditor’s distribution is traditionally linked to the liquidation value, while the consenting creditor’s distribution is linked to the bidder’s offer.
In the second round of bidding, a joint bid by Reliance Industries-Assets Care and Reconstruction Enterprises (ACRE) was the highest bidder at ₹3,405 crore, followed by Himatsingka Ventures at ₹3,297 crore, as reported on February 16. The other two bidders are Welspun promoted Easygo and GHCL offering ₹3,102 crore and ₹2,140 crore respectively. In the first round, the Reliance-ACRE team made the highest bid of ₹2,363 crore which was well below the liquidation value. In a series of meetings held last week, the central creditors’ committee discussed the distribution of proceeds and ways to secure improved offers.
In securing improved bids, some lenders have suggested a Swiss challenge auction in which the highest bidder will be the anchor bid. As part of the Swiss auction, the Reliance-Acre team will have the first right to match all counterbids. The other option considered by lenders was to relaunch offers in the hope of securing improved offers. ACRE, is an asset reconstruction company backed by Ares SSG Capital.
Regarding revenue distribution, the core group of leaders decided that revenue sharing will be tied to the security held by each lender. An unconventional approach to product distribution is being offered to discourage lenders from voting against a plan that could result in liquidation, the lender quoted above said.