Andhra Bank to sell SEL Manufacturing loan to ARCs

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Mumbai: Andhra Bank is selling its loan exposure to SEL Manufacturing Co. Ltd to asset reconstruction companies (ARCs), a tender on its website showed. With this, the state-run bank joins other lenders selling loans of companies referred for insolvency proceedings to ARCs.

The bank’s principal balance exposure to the company stands little over Rs103 crore. This sale is part of the non-performing assets worth Rs3,251 crore offered for sale to ARCs, the tender showed. The bidding will take place on 2 February.

SEL Manufacturing was part of the second list from the Reserve Bank of India against whom banks were directed to file insolvency petitions if they couldn’t finalize resolution plans by 31 December. The petition was filed by State Bank of India.

Andhra Bank has set a reserve price of Rs58 crore for an all-cash loan sale. In case ARCs bid in a mix of cash and security receipts under the 15:85 structuring rule, the reserve price is Rs68 crore. Under the 15:85 rule, ARCs are required to pay banks minimum 15% of the sale value of the asset upfront, while issuing security receipts for the remaining amount.

Ludhiana-based SEL Manufacturing had undergone restructuring under the corporate debt restructuring (CDR) mechanism.

“The credit facilities envisaged and sanctioned under CDR package were not fully released by the lenders which resulted in sub-optimum utilisation of manufacturing facilities and the company could not complete one of its spinning project where substantial amount was already incurred. All this has led to adverse financial performance and erosion in net worth of the company,” said the company in its FY17 annual report.

Earlier this month, Union Bank of India and Bank of Baroda (BoB) had put up about Rs16,270 crore worth of loans, including those of Bhushan Steel Ltd and Essar Steel Ltd, for sale to ARCs. Both steel companies are in RBI’s first list of 12 cases undergoing insolvency proceedings. Last month, Indian Overseas Bank too sold its exposure in these two steel companies.livemint