LIC, EPFO make no headway in selling Reliance Cap bonds
12 Sep 2021
Some international distressed asset investors are keen to buy bonds of the bankrupt , but bureaucracy and fear of unwarranted investigations seem to be holding the trades back, market insiders told ET.
Life Insurance Corporation of India (LIC) and Employees’ Provident Fund Organisation (EPFO), which own Reliance Capital bonds worth an estimated Rs 6,000-6,500 crore, are in a bind as to whether to hold on to them or sell them because their current value is speculated to be less than a tenth of their original investment.
Attempts to sell those bonds have not progressed amid fears and confusion about whether such trades would be opened for investigations at a future date, market insiders said.
This in turn has made the resolution of Rs 15,000 crore defaults by the Anil Ambani-promoted financial services firm elusive, they said.
Both LIC and EPFO are said to have held informal calls with distressed asset buyers keen to acquire these papers through the secondary market route, three people familiar with the matter told ET. But no decision has been taken yet.
“Either you have to sell or act to resolve. None is happening for now,” one of the persons said.
Some dealers said the matter may require government intervention for resolution.
Last month, LIC had attempted to sell Reliance Capital bonds worth about Rs 1,000 crore, which was part of a larger kitty (about Rs 10,000 crore) on the offer.
IDBI Capital market was mandated to carry out the deal, but it fizzled out.
Some global players did bid for the bonds, but the insurer rejected all bids citing “not matching expectation”.
“We did not even know what the expectation was,” said one of the bidders. “At least, it could have conveyed to us that instead of any arbitrary rejection.”
Almost the whole Rs 15,000 crore of Reliance Capital’s credit are supposedly secured lending, mostly through bonds (or non-convertible debentures). The unsecured share of credit is estimated to be at Rs 3,000 crore.
Deutsche Bank, Axis Bank, Ares SSG, Singapore-based Broad Peak Investment,
and some mutual funds, too, have invested in Reliance Capital’s debt securities in smaller quantum.
Some global investors including SSG have likely acquired Reliance Capital bonds running into a few hundred of crores in the recent past from the secondary market. It likely approached both LIC and EPFO to acquire more securities but in vain.
SSG declined to comment on the matter.
Reliance Capital, LIC and EPFO did not reply to ET’s emailed queries sent Saturday afternoon.
There is currently no formal committee of creditors. Informal talks are going on with Reliance Capital itself engaging into some discussions with lenders.
“NCLT route is not a feasible one for Reliance Capital as this particular case won’t have strong backing from the authorities that backed DHFL stakeholders strongly,” said an executive, whose institution owns some Reliance Capital securities.
Some smaller lenders are waiting for LIC and EPFO to either sell out their share of sticky loans or negotiate a resolution deal, which could well pave the way for a possible resolution of the papers they hold.
EPFO and LIC, both government-owned entities, just cannot resort to any secondary market route to exit as it may require approvals from the government, a fund manager said.
This needs immediate attention from the government as this could well set a precedent for the distressed asset industry where India has emerged as a major player, dealers said.