LIC’s decision to sell RCap debt to ARC’s petulant lenders
Lenders and bidders of indebted Reliance Capital (RCap) have opposed plans by Life Insurance Corporation to sell bond investments worth Rs 3,400 crore in the former Anil Ambani Group company, alleging a “conflict of interest”.
The insurer is set to sell the bonds to Assets Care & Reconstruction Enterprise (ACRE), an asset reconstruction company (ARC) backed by Ares SSG Capital.
RCap’s lenders allege that LIC has launched a parallel process to sell the bonds because the deadline for submitting binding offers ends on November 28. According to sources, the insurance juggernaut’s bond timing and pricing are the cause for concern.
The LIC has launched a Swiss Challenge process to solicit bids from CRAs, with November 25 being the last date. Before initiating the process, he had received a binding offer from ACRE, with the CRA offering 27 cents for every dollar. This would result in a 73% discount for the insurer, sources close to the development said.
RCap had offered two options to all bidders. Under the first option, companies could bid for Capital Dependency, including its eight subsidiaries. The second option gave bidders the freedom to bid for subsidiaries individually or as a group. He put eight companies on the block. These include general insurance, life insurance, health insurance, corporate actions and asset reconstruction.
According to a lender, ACRE is not complying with Sensitive Unpublished Pricing Information (UPSI) under Sebi regulations.
In addition, while potential bidders would be invited to improve the offer made by ACRE, ARC will have the first right to match the counter-offer. Now that the deadline for submitting binding offers for RCap ends on November 28, the Swiss Challenge process was launched a bit late in the resolution process and is “too short”, the lenders said.
LIC is a member of RCap’s Committee of Creditors (CoC) and tries to finalize a transaction three days before the submission of binding offers. “This conflicts with the timing of the submission of binding offers,” said one lender, adding that it would raise the issue at the next CoC meeting.
In accordance with the IBC Act, the CoC will receive the independent valuation from Duff & Phelps and RBSA on November 29 (the day after the submission of the binding offers), which will be available to all CoC members. Thus, it is apparent that ACRE and LIC are trying to reach an agreement before the submission of the binding offers and before the valuation is available, they alleged.