Lenders, bidders are upset about LIC's sale of RCAP debt to ACRE
Lenders, bidders are upset about LIC's sale of RCAP debt to ACRE

Mumbai: The recent decision by LIC to sell its secured main debt in Reliance Capital (RCAP) for Rs 3,400 crore, and only a few days before the deadline for binding bids, has upset the RCAP lenders and bidders.

Asset reconstruction companies (ARCs) are being sought out by LIC through a Swiss Challenge process in order to sell its stake to Reliance Capital. The Expression of Interest (EOI) must be submitted by November 25. On the other side, the RCAP binding bid submission date is November 28.

Sources said that RCAP lenders are concerned that LIC started a different parallel process so close to the deadline for bid submission to sell its RCAP debt.

LIC obtained a binding proposal from ACRE SSG, Singapore, for its Rs 3,400 debt in RCAP before beginning the Swiss Challenge process for the same of its debt. The LIC will receive a 73% reduction as a result of ACRE's offer of 27 cents for every dollar.

LIC is currently conducting a Swiss Challenge procedure based on ACRE's bid in which potential bidders will be challenged to outbid ACRE. The counteroffer will, however, be first matched by ACRE.

The timing and cost of LIC's sale of its Rs 3,400 crore RCAP debt have drawn criticism. Since both LIC and ACRE are members of RCAP's COC, bidders have claimed that there was a conflict of interest in the sale of LIC debt to ACRE. RCAP is exposed to ACRE to the tune of Rs. 1,350 crore.

A lender claimed that ACRE SSG would not adhere to SEBI laws regarding "Unpublished Price Sensitive Information (UPSI)".

The timing of this proposed sale, which calls for offers to be submitted by the LIC on or before November 25 in accordance with the Swiss Challenge process, directly conflicts with the binding bids requested by the RCAP Administrator on November 28.

The other CoC members and bidders are furious with LIC for trying to complete the transaction three days before the binding bids are due. LIC is a member of the CoC.

The independent appraisal of Duff & Phelps and RBSA will be provided to the CoC on November 29 (the day after binding bids are submitted), in accordance with IBC rules, and will be accessible to all CoC members.
Hence,  it is apparent that ACRE and LIC are trying to close a deal before the submission of the binding bids, and before the valuation is available.

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