Textile maker Alok Industries' resolution for its lenders to convert loans into controlling equity has been forestalled by a court order until a winding-up petition by HSBC is worked out. Alok had taken the decision as part of a corporate debt restructuring.
However HSBC's petition filed on behalf of a consortium of unsecured lenders, led by VTB Capital, is pending. It concerns Alok’s liquidation and settlement of outstanding dues, part of a loan the company had taken. The matter has been adjourned till March 22 in the hope that the involved parties will come to an agreement, allowing the takeover process to continue.
In January, a joint forum of 25 banks led by State Bank of India that had loaned around Rs 13,000 crores to Alok had decided to convert loans into a 65 per cent equity stake. SBI Capital Markets was mandated to run a formal auction process to sell the core businesses as a whole or in parts. However, this process has no proposals for unsecured lenders though it accounts for repayment of its secured lenders, mostly public sector banks.
The court's decision to stop lender action may set a precedent. In several similar pending cases, secured lenders are engaging with unsecured lenders out of court to arrive at haircut ratios and repayment schemes because court proceedings could hold up repayment for all concerned.
It maybe recalled PE funds TPG Capital Management and KKR & Co LP are competing with domestic textile companies Vardhman Group, Trident and a brand new special situations joint venture between Ajay Piramal Group and Brescon to take control of debt-ridden Alok Industries.
The potential suitors are believed to be keen on individual assets than taking control of the listed Alok Industries. Some have expressed their discomfort about governance quality, given that the company's statutory auditor Delloitte Haskins & Sells LLP quit last November within five months of coming on board.