SBI to offload guarantees tied to Reliance Naval loan

30 May 2024 , 09:02 AM

The sale of personal guarantees provided by Nikhil Gandhi, the former promoter of Reliance Naval and Engineering, has been started by State Bank of India (SBI). A reserve price of ₹3.48 Crore has been set by the bank, which represents less than 1% of the ₹1,160 Crore principle claim that the bank has placed on the personal guarantee.

In terms of the remaining balances owed to any lender for personal guarantees, this would be considered the largest secondary market trade.

According to a senior official in the distressed loan business who talked to ET, the transaction also shows that the amount recovered under the personal guarantee may be negligible in comparison to the claim amount.

As of May 31, 2024, the bank has principal outstanding dues of ₹1,160 Crore and total dues of ₹3,512 Crore, according to a notice on its website. According to the bank, it wants to assign both the guarantee and the remaining debt.

On the loan, SKIL Infrastructure supplied corporate guarantees, while Nikhil Gandhi and his brother Bhavesh Gandhi provided personal guarantees.

Reliance Naval, Anil Ambani’s former company, was sold last year under the Insolvency and Bankruptcy Code (IBC) for a phased payment of ₹2,108 Crore. In order to purchase Reliance Naval, Swan Energy collaborated with resolution applicant Hazel Mercantile via its special purpose business, Hazel Infra.

The Supreme Court affirmed in December of last year the constitutionality of an IBC clause enabling lenders to pursue unpaid debts from the personal guarantors of corporate borrowers.

Lenders may effectively use the Act’s provisions in the event that, even after selling the company via IBC, they are unable to collect the full amount owed. As long as the promoter of the company that is in default has given a personal guarantee against the loan, the lender may activate the provision.

Reliance Naval’s resolution professional acknowledged ₹12,429 Crore in claims from creditors, with lenders recovering roughly 17% of the total.

This granted lenders the authority to use the rules of personal insolvency to recoup the remaining debt. The difference between the claim and the amount recovered from the company’s sale under IBC is known as the residual debt.

SBI has set a date for an auction on June 25 and requested expressions of interest by May 31.

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