Banks plan to recast Rs 4,000 crore CG Power loans
Lenders of the fraud hit CG Power plan an easier moratorium on repayment of loans and are also considering whether the company needs emergency funding, the banks have appointed SBI Capital Markets to prepare a resolution plan for the same.
The lenders are also considering whether the company needs emergency funding and have appointed SBI Capital Markets to prepare a resolution plan, one person said.
“The focus is on getting consensus on standstill arrangements and that priority funds should be arranged,” an official involved in the matter said. “Lenders are presently mulling ways to ensure operational continuity of the company.”
Corporate governance violations surfaced at CG Power in August, with a board-led investigation revealing wrongdoing by current and former employees, leading to the dismissal of chairman Gautam Thapar. The probe found that these employees allegedly understated liabilities and advances made to related parties while pledging the company’s assets without permission. It said advances to related and unrelated parties were understated by Rs 4,796 crore and total liabilities understated by Rs 2,661 crore. The company fired Thapar on August 29.
In the past, lenders have avoided releasing urgent working-capital loans, not wanting to be investigated by government agencies as in other loan cases. The people also indicated that CG Power board is in talks with private equity firms to raise funds but was finding it difficult due to the current mess.
People in the know said the CG Power board had discussed the matter with lenders and had sought more working capital, but no decision has been taken yet.
“We want the company to run as a going concern. But with the ongoing investigations in Bhushan, IL&FS and other loan cases, we not only have to worry about the Central Vigilance Commission but these investigative agencies as well that come after banks with the power of hindsight,” said a banker involved in the matter.
Some of India’s biggest mutual funds hold substantial stakes in CG Power. HDFC Asset Management Company held 9.18%, Aditya Birla SunLife AMC 8.94%, Franklin Templeton AMC 3.19%, Reliance Capital Trustee 2.03% and IDFC Sterling Value Fund 1.53% at the end of June. LIC holds 2.25% in the company while private equity giant KKR holds 10.8%.