Anil Ambani-backed Reliance Power has asked Vidarbha Industries Power's lenders for a one-time settlement (OTS) of 1,200 crore to pay off its debt. According to one source, Varde Partners, a leading worldwide alternative investment business, supports Reliance Power's OTS offer.
Reliance Power and Varde Partners signed into an indicative memorandum of understanding in September 2022 to borrow up to 1,200 crores of debt for the settlement, discharge, and/or acquisition and restructuring of specific financial debts that Reliance Power had borrowed. Varde Partners made a 550 crore investment in Reliance Infrastructure in June 2021. Since 2019, Varde has invested in thermal power projects, such as KSK Mahanadi and RattanIndia Power.
The company has proposed to pay the lenders, including Axis Bank, State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, and Bank of Maharashtra, 1,200 crore according to the proposal. According to Reliance Power's annual report, Vidarbha got secured rupee and foreign currency term loans from banks, with the total amount still owing at $2,216.43 crore as of March 31, 2022. According to a report published on February 1 by rating agency ICRA, the company's
overall borrowing, including both short-term and long-term debt, is 3,264 crore. NARCL had also made the bankers a 1,150 crore offer. 15% of the total amount will be paid by NARCL up front, with the remaining 85% being paid over the following five years. One lender stated, "All bids are unsolicited as lenders have not initiated the process." The two proposals have been the topic of meetings with lenders. Lenders will gather the next week to go over the proposed settlement and the two offers from CFM ARC and NARCL.
Over the past few years, Vidarbha Industries Power has suffered losses. Due to below-threshold availability in some years, its facility has been out of commission since January 2019, and its power purchase agreement with Adani Electricity Mumbai was cancelled on December 16 of the same year.
The company had challenged the validity and legality of the termination letter, it has received unfavourable rulings from the Maharashtra Electricity Regulatory Commission and the Appellate Tribunal of Electricity and currently, the matter is pending with the Supreme Court, according to the ICRA report.
To restructure the debt out of court, the lenders first signed the intercreditor agreement on July 6, 2019. The framework did not result in a debt restructuring, and the agreement terminated in January 2020. Axis Bank submitted an application for the beginning of corporate insolvency under the Insolvency and Bankruptcy Code after the agreement's expiration, but the Supreme Court denied it.
Financial creditors have the ability to start the corporate insolvency resolution procedure, but NCLT has the power to accept or reject the application regardless of the presence of a default, according to an important judgement issued by the Supreme Court on July 12, 2022. In order to make it clear that the NCLT must accept an application if there is a defined default, the government proposed a change to the IBC in January 2023. At the Butibori Industrial Area in Nagpur, Maharashtra, Vidarbha Industries Power runs a domestic coal-based facility with a capacity of 600 MW (2x300 MW).