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NARCL proposes to buy 5 bad debt accounts including that of Future Retail

According to the news report, NARCL wants to provide 15% of the consideration in cash and the remaining 85% in the form of security receipts.

August 25, 2022 12:57 IST | India Infoline News Service

According to news reports, the government-sponsored bad bank National Asset Reconstruction Company of India Ltd (NARCL) this week proposed to buy five impaired loan accounts, including those of Future Retail and GTL Ltd.

According to the reports, McNally Bharat Engineering and Consolidated Construction Co. Ltd (CCCL) are two engineering procurement and construction firms whose debt NARCL has also proposed to buy. In a recent letter to lenders, the government-owned asset reconstruction corporation (ARC) made the suggestion, they claimed, adding that the fifth business was Rainbow Papers.

The reports stated that NARCL won't make a legally binding offer until it has received the lenders' written approval. One of the aforementioned individuals stated that the ARC has previously stated that it will only make binding offers if 75% of lenders by value accept. According to the report, doing so would give NARCL influence over the resolution procedure. A proposal can only be carried out in the case of an out-of-court settlement if 75% of the lenders concur with the conditions.

A bankruptcy court settlement requires the consent of 66% of the verified lenders.

CCCL, McNally Bharat Engineering, and Future Retail, three of the five accounts suggested last week, are going through insolvency processes. The resolution professional (RP) for Future Retail has acknowledged the highest claim from financial creditors, totalling Rs17,511 crore. While lenders have asserted claims totalling Rs2,693 crore in the instance of CCCL, McNally Bharat's RP has admitted claims from creditors totalling Rs4,840 crore.

According to the news report, NARCL wants to provide 15% of the consideration in cash and the remaining 85% in the form of security receipts. The government guarantees these security receipts in the event that the ARC is unable to recoup the debt after five years is the main incentive for lending to NARCL.

NARCL hasn't been able to reach any agreements since loan prices aren't aligned, and it's unclear how the government guarantee will operate. Lenders are looking for clarification on the conditions under which the guarantee may be used to make up for recovery deficiencies.

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