RCap lenders hive off home finance, NBFC into separate trust for resolution


In order to expedite the sale process of bankrupt firm Reliance Capital, its lenders have decided to carve out Reliance Commercial Finance and Reliance Housing Finance clusters into a trust for a separate resolution process. The proceeds of the sale of these two in future will flow directly to the lenders of the which is currently undergoing a process.

An asset sale committee, which will be formed to supervise the sale of these two companies, will consist of three members of the CoC, the administrator and a representative of Deloitte. The bidders were told that in the event of failure or delay in the implementation of the resolution process of the housing finance and arm, the trustee, along with the asset sale committee members, will decide on the alternate sale process in the next one year or as decided by the committee.

The combined debt of these two entities, and RHF, is about Rs 25,000 crore and the proposed Trust structure would ensure the bidders of RCAP do not have to deal with this debt. Several lenders, including Life Insurance Corporation of India, have made total claims of Rs 25,333 crore against .

In July 2021, the lenders had selected Authum Investment, a Mumbai-based firm, as the successful bidder for and RHF, with a bid of Rs 1,600 crore and Rs 2,911 crore respectively. But after the RBI sent the parent firm, to the court last December, the entire process restarted again, monitored by an RBI-appointed administrator and the National Company Law Tribunal.

After the administrator sought expressions of interest, 54 submitted their EoIs. But of these, only two — Piramal group and Yes Bank — are now actively engaging with the CoC while the rest have lost interest.

As per sources, the poor response to the resolution plan has forced the COC to extend the financial bids by four times in the last couple of months. Now the fresh date for plan submission is August 10.

The RCAP resolution has been fraught with regulatory hurdles since the beginning of the process. The precondition of forming a consortium by the different bidders, for the bidding of RCAP’s multiple business clusters, and the precondition to make all cash bids drove the majority of bidders away.

In fact, one of the lenders, LIC’s plan to sell its exposure in bonds worth Rs 3,400 crore issued by Reliance Capital (RCap) did not find any takers among asset reconstruction (ARCs), as the deadline to submit expressions of interest (EoIs). A source said IDBI Capital, which has been mandated to sell the bonds, will extend the deadline to July 22. The bonds are trading at 70 per cent discount.

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