RCap Debt Settlement: Home finance and NBFC units can be parked in a trust

The Committee of Creditors (COC) of Reliance Capital has proposed to put Reliance Commercial Finance (RCF) and Reliance Home Finance (RHF) into a separate trust. The debts of these two entities will be dealt with separately.

The combined debt of these two entities — RCF and RHF — is about 25,000 kroner. The proposed trust structure would ensure that RCAP bidders do not have to account for this debt, a bank source said. This will reduce the debt on RCAP’s books to around 20,000 kroner. Last year, over 91 percent of RHF and RCF lenders voted in favor of Authum Investment and Infrastructure’s resolution plan. In July 2021, the lenders selected Authum Investment as the successful bidder for RCF and RHF, with bids of 1,600 kroner and 2,911 kroner. Bankers say the trust structure will allow RHF to go through with the Authum bid, while at the same time bidders for RCap will have to deal with less debt. Under the original plan, bidders for RCap’s assets had to bid for 45,000 kroner worth of debt.

The CoC has also waived the requirement of payment of 75 crores security deposit (EMD) on the first date of submission.

Dropping the EMD on the first filing date is another attempt by the COC to continue the resolution process.

According to banking sources, of the initial 54 expressions of interest received, only a handful of bidders, including Piramal Group and Yes Bank, are actively involved in the Reliance Capital resolution process.

Companies have the option to bid either for the entire entity at group level or for different business clusters of subsidiaries.

A consortium-led approach to Reliance Capital’s resolution appears to be turning into the preferred approach for many bidders.

According to sources close to the development, the size of the Reliance Capital Group and its large number of subsidiaries appears to be turning into a challenge for many bidders. It is believed that most are interested in profitable general and life insurance for debt-ridden groups and are finalizing their approaches based on this.

Posted on

July 17, 2022

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