ICICI Bank has sold the Rs 600-crore (Rs 6 billion) loan it had given to BPL Ltd to the Asset Reconstruction Company of India Ltd (Arcil).
"The brand name of BPL Ltd, which had been pledged to ICICI Bank, is also now in the possession of Arcil as security," sources said.
ICICI Bank was BPL's lead bank and accounted for close to 35 per cent of the company's total debt exposure of Rs 1,400 crore (Rs 14 billion).
Sources said ICICI Bank still held some investment in the form of preference shares in BPL since Arcil could not buy these. However, the bank had no future commitments towards BPL, they added. Arcil executives declined to comment on the development.
ICICI Bank's sale of the asset took place in March this year. BPL, which recently got its corporate debt restructuring plan (CDR) approved by a majority of its institutional creditors, is now faced with the task of having to negotiate with Arcil.
The deal thus removes a huge non-performing asset from ICICI Bank's balance sheet but burdens BPL, which has to face a significant new creditor.
It is not exactly known at what price Arcil bought the ICICI exposure. Sources said under the CDR package, ICICI Bank was ensured a repayment of Rs 265 crore (Rs 2.65 billion). "Arcil must have bought this cash flow spread over a period of time at a discount," they said.
Arcil does not want to buy out other lenders as the CDR package is in the final stages of implementation.
It plans to sell off its exposure at a later date when the exposure becomes a performing asset.
Sources said the package was expected to be implemented soon after it got the nod of Kerala High Court. Under Section 391 of Companies Act, if 75 per cent of lenders agree to a debt recast package and it gets the nod of a high court, the settlement process can kick off.
The lenders have signed the CDR package on the condition that Sanyo Electric Company of Japan pumps in money into the CTV division of BPL to create a joint venture. These funds are expected to settle the dues of BPL's lenders. The CDR package had envisaged a repayment period of 10 years and an interest rate of 12.5 per cent.
"While some of the lenders will exit on receiving cash, the others will recast the remaining debt. The amount to be recast will vary depending on the number of lenders who decide to exit," said an institutional source.
Last year, ICICI Bank had written off and sold two bad accounts of BPL group companies -- BS Refrigerators Ltd and BS Appliances Ltd -- to Arcil. BS Refrigerators had a principal outstanding of Rs 51 crore (Rs 510 million) towards ICICI Bank while BS Appliances owed Rs 57 crore (Rs 570 million).
