State Bank of India will sell its outstanding £3.815bn loan from KSK Mahanadi Power to Aditya Birla Asset Reconstruction Company, helping the bank shore up earnings for the June quarter, two people behind the plan said.
The bank said Aditya Birla ARC's bid of Rs 1,544 crore was the highest in an auction held on Monday, they said.
This will be the largest sale of non-performing loans by a bank in prepaid form, representing a 40% repayment. To date, most large-scale bad debt sales have been structured settlements with installment payments in the form of receipts of securities that would be collected upon payment by delinquent borrowers.
Aditya Birla ARC's offer was backed by its joint venture partner Varde Partners, the sources said. "The bank has fully financed this loan, which will be reflected in the collection and revenue figures," said a bank official who requested anonymity.
SBI and Aditya Birla
ARC did not respond to ET's request for comment. SBI's decision to leave the power company comes as the government has asked lenders to support struggling power producers to increase production.
By acquiring SBI loans, Aditya Birla ARC would take control of 34% of KSK Mahanadi Power's loans, a critical level required by the Insolvency and Bankruptcy Act (IBC). A resolution would not pass if 34% of lenders vote against it.
ARC's 34% share of loans would include the 18% it would earn by acquiring SBI
loans and the 16% it already has on its books after borrowing from Axis Bank over the past two years, which it bought Bank of Baroda and Punjab. National Bank.
"The timing of SBI's proposed sale of the KSK Mahanadi loan indicates that lenders are no longer confident of a speedy resolution under the IBC-led process," one lender said.
KSK Mahanadi Power has been in bankruptcy proceedings for more than two and a half years. PricewaterhouseCoopers-backed settlement expert Sumit Binani has extended the deadline to submit a firm offer for the company from April 29 to July 8. PR received claims of Rs 29,501 crore from financial creditors.Also Read: FPIs continue to sell, with a total of $4.6 billion in May