56 lenders to sign inter-creditor agreement in a few days
11 July 2018: As many as 56 bankers are set to approve an inter-creditor agreement in fewer days which will prevent dissenting creditors from going clear exit. Banks will have to refer unresolved loans to the bankruptcy court and if there are no buyers at bankruptcy court, they fear the asset value may erode
If 66 per cent of lenders by value agree to a resolution plan, it would be binding on all lenders agreement says. However, the dissenting creditors will have the option at a discount of 15 per cent to the liquidation value they can sell their loans to other lenders or can buy the whole portfolio funding 125 per cent of the value agreed.
For dissenting creditors, according to the agreement the “lead bank has the right, but not the obligation, to arrange the buyout of the loan facilities at a value that is equal to 85 per cent of the liquidation or the resolution value —whichever is lower.” However, “if the lead bank does not organise for a buyout, the dissenting lenders shall have the right, but not the responsibility, to arrange for buyout of the facilities of all the other lenders at a value that is equivalent to 125 per cent of the liquidation value or the determination value — whichever is larger.”
Dissenting creditors can also exit by trading their loans to any entity at a cost mutually reached at between the lender and buyer. The agreement has a standstill clause wherein all lenders are banned from enforcing any legal action against the borrower for recovery of dues. During the delay period, lenders are prevented from transferring or allotting their loans to anyone except a bank or finance company. But it is not clear if a loan can be traded to an asset restoration company during that period.
Lenders are in the process of getting this inter-creditor agreement adopted by their boards. However, the outline would not prevent lenders from acting against borrowers or directors for a criminal offence.