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ABG Shipyard agrees to insolvency proceedings

LiveMint logoLiveMint 20-07-2017 Maulik Pathak

Ahmedabad: Debt-ridden ABG Shipyard Ltd on Thursday admitted before the Ahmedabad bench of the National Company Law Tribunal (NCLT) that it had defaulted on loan repayments and agreed for bankruptcy proceedings to be initiated against it.

The company is one of the 12 large defaulters identified by the Reserve Bank of India for launch of early bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC). Lawyers appearing on behalf of ABG Shipyard told the tribunal that a petition for liquidation of the company by as many as 20 of its unsecured creditors had been recently admitted before the Gujarat high court, and the next hearing is scheduled for 27 July.

ABG’s lawyers said they had not opposed the liquidation petition in the high court.

However, lawyers representing ICICI Bank Ltd argued that since no winding-up order had been delivered or an official liquidator appointed, the NCLT can admit the insolvency and bankruptcy petition.

Once the tribunal admits the petition, a six-month moratorium kicks in and existing proceedings against the defaulter are suspended for that period. Justice Bikki Raveendra Babu reserved the order for 27 July.

ICICI Bank, which is the lead lender of a consortium of 22 creditors who have lent money to ABG Shipyard, has been asked by the other lenders to prepare a resolution plan.

With debt of about Rs10,000 crore, the company’s lenders had put the shipyard on the block.

In a 4 July filing to the BSE where it is listed, ABG Shipyard, while admitting that it was in a “deep financial crisis”, reported a net loss of Rs822 crore for the quarter ended December 2016.

It had posted a net loss of Rs1,266.22 crore during the corresponding quarter a year earlier.

The company also said it had defaulted on repayment of loans and covenants of the corporate debt restructuring (CDR) scheme of lenders. As a result, the CDR scheme was discontinued on 1 March, 2017, it said in the July BSE filing.

With debt of about Rs10,000 crore, the company’s lenders had put the shipyard on the block.

They attempted to find a buyer for their 51% stake, which the lenders got after conversion of debt. However, they couldn’t find any buyers.

So far, three among the 12 companies—Jyoti Structures Ltd, Alok Industries Ltd and Monnet Ispat and Energy Ltd—have seen bankruptcy petitions being admitted.

RBI’s criterion for selecting these dozen companies was that the total banking exposure of the company should be at least Rs5,000 crore and 60% of this exposure should have turned non-performing by March 2016.

Once a petition is admitted to the tribunal, the lenders have 180 days to devise a resolution plan. If 75% of the creditors agree on such a plan, the term can be extended by 90 days. If this does not happen, the insolvency code allows the liquidation of the company.

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