Lenders seek cash and bank guarantees from Binani promoters for settlement

The committee of creditors comprising the representatives of lender banks of Binani Cement have examined the debt repayment proposal of Binani Industries, which has evinced a keen interest to repay its debt.

Lenders have also asked the company to get the necessary approvals from the courts. The committee of creditors is expected to meet again on Thursday to finalise the repayment terms.

Binani Industries is understood to have offered the CoC of Binani Cement an assurance on swift and complete payment in support of its resolution plan at a meeting on Wednesday.

The company, however, is yet to decide on giving a bank guarantee to the lenders as the Committee of Creditors has not come out with a concrete formula.

“We have not given any bank guarantee today. First the CoC has to decide on the out-of-tribunal settlement, only then can we offer the bank guarantee,” reports quoting a Binani Cement lawyer as saying.

“The meeting is still continuing. Before the CoC today, Binani Industries is going to make the same presentation that it had made before the NCLAT (National Company Law Appellate Tribunal) on April 3 and the NCLT (National Company Law Tribunal) on April 2 that they are willing to make the entire payment in 10 days. If the tribunal wants, Binani can secure the amount in the tribunal,” the lawyer was quoted as saying.

Reports quoting creditor sources also said the banks have sought part payment in cash and assurance of the rest through a bank guarantee to consider an out-of-tribunal settlement.

The move followed an in-principle commercial understanding with Aditya Birla-led UltraTech Cement to sell the entire stake in Binani Cement. UltraTech Cement had agreed to buy out the majority stake of 98.43 per cent in the cement manufacturer for Rs7,266 crore. 

UltraTech had offered a letter of comfort to Binani Industries and said that its offer to buy Binani Cement is subject to the termination of the insolvency proceedings in the NCLT. The Kolkata bench of the NCLT had said that the decision to go ahead with an out-of-tribunal settlement would lie with the CoC. It had asked the lenders of Binani Cement to consider an out-of-tribunal settlement within the deadline of 9 April.

But, on 16 March, Dalmia Bharat had said the resolution plan submitted by Dalmia Bharat-controlled Rajputana Properties was approved by the CoC.

“The CoC of Binani Cement has recommended the resolution plan to the NCLT for its requisite approval,” Dalmia Bharat said in a statement, adding that the resolution plan has received almost 100 per cent approval of the CoC members. The creditors to Binani Cement include State Bank of India, IDBI Bank, Canara Bank, Bank of Baroda, Bank of India, Edelweiss Asset Reconstruction Company and others.

A statement on Binani Cement’s website said financial creditors of the company had claimed Rs6,470.26 crore, while the NCLT had admitted claims worth Rs6,469.36 crore. On Tuesday, a two-member bench of the NCLAT asked the parties involved in the resolution process of Binani Cement to consider an amicable settlement.

The bench was hearing an application filed by Binani Industries against the resolution professional (RP), Vijaykumar V Iyer. This direction by the appellate body should further strengthen the prospects of UltraTech Cement in the acquisition of the beleaguered cement maker. The matter is scheduled for hearing on 19 April.

Binani Industries had moved the NCLAT in March against the RP, alleging that its order was not followed while declaring the successful resolution plan for the insolvent cement maker. In its application, Binani Industries had also asked the appellate tribunal to declare the meeting of the CoC of Binani Cements held on 14 March as “null and void”.

The move is expected to favour Aditya Birla group company UltraTech, which gave a letter of comfort to the promoters of Binani Industries after it was voted as the second-highest bidder in the second round of bidding. Ultratech said it would pay Rs7,200 crore.

"With both the NCLT (National Company Law Tribunal and NCLAT asking us to go for an out-of-court settlement, we feel it is better to settle the issue with the promoter group which have come forward and made the offer, which settles the dues of all the secured lenders with interest and unsecured lenders and operational creditors as well," a banker belonging to the lender groupwas quoted as saying.

The sale of the Braj Binani-promoted Binani cement, the flagship company of Binani Industries was expected to be a smooth affair. The company's a global manufacturing capacity of 11.25 million tonne per annum with an integrated plant with two kilns and four in Rajasthan is expected to give both the warring companies a strong foothold in Western India.

In the first round of bidding, a number of companies including LafargeHolcim, Heidelberg Cement, India Cement, Orient Cement, Ramco Cement, Shree Cement, UltraTech Cement and Piramal Group, Ace stock market investor Rakesh Jhunjhunwala and Ramesh Damani of D'Mart had put in their bids. JSW Cement had emerged as the winner with a bid of $919 million.

But that auction was junked after it was discovered Binani Cement had offered a corporate guarantee of $250 million for the acquisition of a fibreglass asset in Europe known as 3B in 2012 by Binani Industries.

By February 2018 the next auction was in progress with Dalmia Bharat Cement and UltraTech Cement in the race. Dalmia Bharat, which was in a consortium with Bain Capital's India Resurgent Fund and Piramal Enterprises, emerged as the largest bidder.

The dispute arose as the letter of comfort was handed out by UltraTech after it lost out to rival, the Dalmia-led consortium in a bidding process under the IBC 2016. UltraTech had put in a bid of Rs 6,200 crore, which it improved by Rs1,066 crore after the bidder was selected. The company contested that it wasn't a transparent process.

Matters got further complicated with State Bank of India, Hong Kong branch, approaching the NCLT demanding that their dues of Rs40 crore for corporate guarantees extended to Binani and also Exim Bank for repayment of an unsecured loan of Rs620 crore be paid immediately.

Binani Industries approached the NCLT Kolkata asking for some time to pay off all its dues to all its financial and operational creditors.

Binani Cement also runs a grinding plant at Jebel Ali, Dubai and an integrated plant, Shandong Cement, in China. It products in India include 43 and 53 grades Ordinary Portland Cement and Portland Pozzolana Cement.