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TMI Blog2019 (9) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval of GAIL's bid from the Creditors' committee of IWEL, in terms of the Second MOU, GAIL's bid was disclosed to ORIX vide intimation letter dated 18.4.2019 - Subsequently, ORIX, by way of its letter dated May 13, 2019, issued to IWEL and IEDCL, confirmed its intention to exercise its right under the Second MoU to acquire 51% of the share capital in each of the Specified Wind SPVs based on the highest bid price ( i.e. GAIL's bid amount of INR 1,064 Crores for 100% of the share capital of each of the specified Wind SPVs). The sale of shares is approved - application allowed. - CP 3638/2018 And MA 2756/2019 - - - Dated:- 28-8-2019 - MR V. P. SINGH, JUDICIAL MEMBER AND MR RAJESH SHARMA, TECHNICAL MEMBER For The Applicant : Mr Ravi Kadam ORDER MA 2756/2019 has been filed by Infrastructure Leasing and Financial Services Ltd., seeking to approve the sale of the shares of Specified Wind SPVs held by IWEL to ORIX, free and clear from all encumbrances, liens, security interest and third party claims upon receipt of the ORIX Revised Bid amount for ORIX, in compliance of the terms of the SPA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar and contemplated certain pre-emptive rights in favour of the other shareholder in the event that a sale of shares is contemplated. Illustratively, Clause 5.1.4 in the case of Khandke Wind Energy Pvt Ltd sets forth as follows: Right of First Offer (a) If any of the Shareholders ( Transferring Shareholder ) proposes to Transfer any of the shares to any third party, then the other Party (Other Shareholder ) will have a right of the first offer (ROFO) to such Transfer. The process to be followed for the exercise is set out below: ** ** ** (d) The Other Shareholder shall be entitled to respond to the ROFO Notice by serving a written notice ( Response Notice) on the Transferring Shareholder prior to the expiry of thirty days from the date of receipt of the ROFO Notice (Response Period) offering to acquire all (but not less than all) the Sale Shares. The Response Notice shall state the proposed price per Sale Share at which the Other Shareholder is willing to acquire all the Sale Shares and the terms of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, as per the first Progress Report, as Asset Level Resolution would entail an asset by asset solution explored through various methods and would weigh well on asset level value maximisation and stakeholder engagement as majority of the loan liabilities exist at the operating asset level. Given that the Resolution Process being contemplated by the New Board was a publicly solicited price discovery mechanism (in light of the key considerations and factors set out in the First Progress Report), a meeting was held on 6.11.2018 between the Applicant and ORIX, wherein ORIX was requested to consider altering the process of monetizing the investments made by the applicant group and ORIX in the Specified Wind SPVs from a private bilateral process as per the First MoU and SHAs to a public one. Accordingly, a memorandum of undertaking dated 28.11.2018 (second MOU) was executed by and between ORIX, IEDCL and IWEL in terms of which it was agreed that the process of monetizing the applicant group and ORIX's investments in the Specified Wind SPVs would be modified (from the private bilateral process contemplated in the SHAs read with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and iii. ORIX, upon receipt of the last binding offer, would have an option to: a. Accept the offer for sake of 100% shareholding (including 49% owned by ORIX) alongwith IWEL; or b. Purchase IWEL's stake in each of the Specified Wind SPVs at the highest binding bid price (received pursuant to the publicly solicited bid process), should the bid price for the Specified Wind SPVs be lesser than the carrying value of the Investment made by ORIX based on an aggregated equity value of INR 2316.2 crores. In line with the objectives and mandate of the New Board and the Second MOU, the applicant issued an advertisement and invitation for expressions of interest (EOI), in terms of which interalia a potential controlling stake held by the Applicant Group in the Specified Wind SPVs was offered to prospective bidders. Subsequently, further to the objectives and broad options for Resolution of the Applicant Group set out in the First Progress Report, the applicant submitted the Initial Resolution Framework and the addendum Framework to the petitioner (collectively referred to as the Resolution Framework , whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e all Category I companies since both the bids of GAIL, which matches by ORIX proposed no haircut or impairment to the debt of the Specified Wind SPVs. (e) Depending on the categorisation of a company as a Category I company or a Category II company, a Creditors' Committee will be formed at the appropriate level. It is pertinent to note that for a Category I company one Creditors' Committee consisting of all financial creditors of the selling Applicant Group shareholder(s) of the Sale Company will be required to be constituted. This is so since the debt of that Category I Company (whether financial or operational) will be assumed by the Highest Bidder (without any impairment). Therefore, the financial creditors of the Selling Shareholder(s) will be consulted as positive equity value will be received by the Selling Shareholder(s), which will, in turn, be utilised to settle dues of the creditors of the Selling Shareholders. (f) Placing the decision of the Creditors' Committee (approval/rejection) before the New Board for consideration and after their approval and if the New Board approves the sale proposal, the same to be pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( b ) Share Purchase Agreement was marked up and uploaded. 3. Appointment of 2 (two) registered Valuers to undertake a valuation exercise for the determination of fair value and liquidation Value in respect of each sale Company. - Two valuers, i.e. (i) Rakesh Narula Co. (having registration number IBBI/RV/02/2019/10679) ( RNC ); and (ii) Adroit Technical Services (having registration numbers IBBI/RV/01/2018/10087; IBBI/RV/02/2019/11177; and IBBI/RV/05/2018/10020) ( Adroit ) were appointed who determined fair value and liquidation value in respect of the Specified Wind SPVs in accordance with Regulation 35 (1) of the IBBI ( Insolvency) Resolution for Corporate Persons) Regulation, 2016. The valuation of fair market value and liquidation value as conducted by the valuers referred to above in respect of each Specified Wind SPV is as follows: (amount in INR Million) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Specified Wind SPVs and additionally attributed a positive equity value for the shares of each of the Specified Wind SPVs. It is pertinent to note that since GAIL's bid attributed a positive equity value for the shares of each of the Specified Wind SPVs without proposing any haircut to the debt of any of the Specified wind SPVs ( which is approx.. INR 3700 Crores), each of the Specified wind SPVs were categorized as Category I companies ( as contemplated under the Resolution Framework Reports). GAIL's bid of approximately INR 4,800 crores for 100% of Enterprise Value contemplated; (i) approximately INR 1064 crores as purchase price for 100% shares of the SPVs; and (ii) approximately INR 3,700 crores towards the aggregate debt of the SPVs, without any hair, cut. Therefore, as per Gail's bid, the value of IWEL's 51% would be INR 542.64 crores (approx). GAIL's bid was placed before the IWEL Board for its consideration and was identified as the Highest Bid. Further, IWEL Board authorised the formation of a Creditors Committee of IWEL and submission of the Gail Bid to IWEL's Creditors Committee. Since GAIL's bid attribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. an acknowledge that the said amount will be updated to account for the accrued interest on the closing date, and will be payable by ORIX in accordance with the provisions of the share purchase agreement. After that ORIX, vide its letter dated June 28, 2019 and July 5, 2019 confirmed the agreed form of the Share Purchase Agreement (Final SPA), which ORIX would execute with IWEL and the specified wind SPVs to conclude the acquisition of 51 % shareholding in each Specified Wind SPVs by paying the ORIX Revised Bid to IWEL. On July 1,2019 the Applicant issued a letter to Justice (Retd.) D.K. Jain for seeking approval of the sale of 51% (fifty-one per cent) shareholding in each Specified Winds SPV held by IWEL to ORIX and the Resolution of the Specified Winds SPVs. After that, by a letter dated July 15, 2019 Justice (Retd.) D.K. Jain approved sale of the Specified Wind SPVs to ORIX (subject to conditions prescribed therein). The operative part of Justice (Retd.) D.K. Jain's letter dated July 15, 2019 is as follows: Having regard to the above factual scenario, and bearing in mind the object and spirit behind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objectives in the First Report and the Resolution Framework conducted the resolution process of the Specified Wind SPVs with the intent of maximising value for all stakeholders involved. It is further contended by the applicant that the Applicant Group comprises 302 Group Companies (169 Domestic Companies and 133 Offshore Group Companies). The aggregate fund based debt outstanding of the Applicant Group as of October 8, 2018, is approx. INR 94,246 Crores. Of this aggregate fund-based outstanding debt, the outstanding fund based debt of the Specified Wind SPVs is INR 3,700 Crores Given that ORIX has agreed to assume the debt of the Specified Wind SPVs and attributed a positive equity value to the specified wind SPVs, a resolution of the Specified Wind SPVs would be a step towards the resolution of the aggregate outstanding debt of the Applicant Group. While the sale process of the Specified Wind SPVs is at its penultimate lap, whereas the asset sale process for education, funds, domestic road, thermal power, water infrastructure, technology and key international assets is underway. The asset sale process for the Specified Wind SPVs is the First asset sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of repayment) to IL FS Energy Development Corporation Limited in the manner as contemplated in the SPA. It is pertinent to mention that after approval of GAIL's bid from the Creditors' committee of IWEL, in terms of the Second MOU, GAIL's bid was disclosed to ORIX vide intimation letter dated 18.4.2019. Subsequently, ORIX, by way of its letter dated May 13, 2019, issued to IWEL and IEDCL, confirmed its intention to exercise its right under the Second MoU to acquire 51% of the share capital in each of the Specified Wind SPVs based on the highest bid price ( i.e. GAIL's bid amount of INR 1,064 Crores for 100% of the share capital of each of the specified Wind SPVs) . It is also clear that on June 17, 2019, ORIX issued a letter to IWEL, inter alia setting forth: i. a revision of its offer for the purchase of IWEl's shareholding in the Specified Wind SPVs to INR 592,87,50,000 ( ORIX Revised Bid ); ii. Confirmation that INR 211,57,85,329 as the total outstanding principal and unpaid interest amount ( net of withholding tax) of promoter debt up to May 31, 2019, which is due to IE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Pvt Ltd, Tadas Wind Energy Pvt Ltd and Kaze Energy Ltd. to ORIX corporation and direct transfer of such shares by IWEL to ORIX free and clear from all encumbrances, liens, security interest and third party claims upon: a. ORIX Corporation making the payment of ₹ 5,928,750,000 in the manner as set out in the Share Purchase Agreement (SPA) dated 7.8.2019 entered into between IWEL and ORIX; and b. ORIX making a payment of ₹ 2,11,57,85,329 (alongwith interest accruing till the date of repayment) to IL FS Energy development Corporation Ltd in the matter as contemplated in the SPA. We also hereby grant IWEL and ORIX the liberty to implement and give effect to the terms of the SPA. We also direct that payment due to IWEL and IEDCL under the SPA be credited into a designated escrow account to be intimated by IWEL and IEDCL ( as the case may be) such funds to be maintained as interest-bearing fixed deposit; and clarify that such funds, when deposited into the relevant bank accounts or maintained as fixed deposits should not be adjusted or set off against any other dues and the distribution of such amounts paid to IWEL and IEDC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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