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LIC's sale of RCAP debt to ACRE upsets lenders and bidders

LIC's sale of RCAP debt to ACRE upsets lenders and bidders

Mumbai,  LICs recent move to sell its Rs 3,400 crore secured principal debt in the Reliance Capital (RCAP), that too barely less than two weeks ahead of the binding bids submission deadline, has upset the RCAP lenders and bidders.

LIC is conducting a Swiss Challenge process to invite bids (EOIs) from Asset Reconstruction Companies (ARCs) to sell its exposure in the Reliance Capital.

The last date to submit the EOIs is November 25. On the other hand, the deadline to submit the binding bids for RCAP ends on November 28.

According to sources, RCAP lenders are upset as to why LIC has initiated a separate parallel process to sell its RCAP debt so close to the bids submission deadline.

Prior to initiating the Swiss Challenge process for the same of its debt, LIC received a binding bid from ACRE SSG, Singapore, for its Rs 3,400 debt in RCAP. ACRE has offered 27 cents for each dollar, resulting in a 73 per cent haircut for the LIC.

Based on ACRE's bid, LIC is now running a Swiss Challenge process under which prospective bidders will be asked to better the offer made by ACRE. However, ACRE will have the first right to match the counteroffer.

LIC's timing and pricing of selling its Rs 3,400 crore debt of RCAP debt have raised eyebrows. Bidders have alleged a conflict of interest in the sale of LIC debt to ACRE, as both ACRE and LIC are members of RCAP's COC. ACRE has an exposure of Rs 1,350 crore in RCAP.

According to a lender, ACRE SSG would not be compliant with "Unpublished Price Sensitive Information (UPSI), as per the SEBI regulations.

However, the timing of this proposed sale to invite bids under the Swiss Challenge process by the LIC on or before November 25 is in direct conflict with the binding bids invited by the RCAP Administrator on November 28.

LIC is a member of the CoC and this attempt to finalize a transaction three days before the binding bids are submitted has upset the other CoC members and bidders.

As per the IBC law, the CoC will receive the independent valuation of Duff & Phelps and RBSA on November 29 (the next day of the submission of binding bids), which will be available to all CoC members.

So it's 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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