Religare Finvest lenders approve company’s one-time settlement offer

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Creditors to Finvest (RFL) have approved a one-time settlement plan proposed by the company’s management in what is the third such resolution of a non-bank lender outside the bankruptcy framework, three people familiar with the process told ET.
(BoI) was the last among the lenders to give its assent to the plan after a board meeting last week, clearing the decks for a settlement with the lenders.

RFL owes ₹5,344 crore to more than a dozen lenders, led by

(BoB). It has offered to settle these claims with an immediate payment of ₹2,320 crore, a 57% haircut for secured creditors.

All lenders had to approve the plan because Reserve Bank of India (RBI) rules say all banks must sign off on a one-time settlement plan. A final clearance from the central bank is also needed for the plan to be implemented.

“Since all lenders have now signed, we expect a quick closure of this issue and since this account is 100% provided for, benefits in terms of provision write-back to banks will come in this quarter,” said a person cited above.

RFL did not respond to an email seeking comment.

To be sure, the RFL offer includes cash reserves of ₹1,700 crore parked in an escrow account with banks. The remaining funds will be infused by parent

, people familiar with the plan said.

The deal envisages ₹2,150 crore to secured creditors, ₹80 crore to the provident fund trust of the employees and a 20% recovery for unsecured creditors. It also includes a payment of at least ₹500 crore after six years from a possible settlement of RFL’s dispute with the erstwhile Lakshmi Vilas Bank, which had taken over deposits from the company to settle loans taken by the previous promoters.

“This has been in the works for a long time. There were issues with the account because it was tagged as fraud due to proof of siphoning of funds by the previous promoters. The management had to convince banks that it was in no way linked to that criminal activity,” said a second person aware of the process.

In 2020, RFL had filed a first information report against its previous promoters Malvinder and Shivinder Mohan Singh, alleging financial irregularities. Multiple investigative agencies are probing different cases of siphoning off totalling more than ₹4,000 crore.

The current management at RFL has distanced itself from the previous promoters and had challenged the classification of the account as fraud.

RFL has been under RBI’s corrective action plan (CAP) since January 2018, which restricts it from expanding business, including giving new loans. The approval of the plan by lenders makes it debt-free and will put the new management back in control, allowing them to restart normal business activities.

“After this plan is implemented, banks will have nothing to do with the company and the management will take charge,” said a third person aware of the process.

BoB,

and are the three top lenders to the company.

This will be the third instance of a NBFC resolution outside the NCLT following SSG Capital’s ₹2,750 crore takeover of Altico Capital in March 2020 and Authum Investments’ takeover of

Commercial Finance in September this year.

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