Sintex lenders will decide on a solution next week

Lenders to bankrupt Sintex Industries will decide next week whether to resume the wind-down process or put the four plans they received to a vote, two people with knowledge of the development said. The decision will be crucial considering all four plans are below liquidation value.

Lenders face a dilemma because reopening proceedings could not only delay resolution, but could also create uncertainty as to whether bidders would make better offers, one of the people quoted said.

At the same time, if all four plans are put to the vote, a majority could vote below the liquidation value, the same person said. Traditionally, the dissenting creditor’s allocation is linked to liquidation value, while the consenting creditor’s allocation is linked to the winning bidder’s bid.

In the second round of bids, a joint bid by Reliance Industries-Assets Care and Reconstruction Enterprises (ACRE) was the highest bidder at ₹3,405 crore, followed by Himatsingka Ventures at ₹3,297 crore, reported February 16. The other two bidders are Welspun advertised Easygo and GHCL with offers of ₹3,102 crore and ₹2,140 crore respectively. In the first round, the Reliance ACRE team made the highest bid of ₹2,363 crore, which was much lower than the liquidation value. In a series of meetings held last week, the Core Creditors Committee considered the distribution of the proceeds and ways to solicit enhanced offers.

When they received better bids, some lenders proposed a Swiss challenge auction where the highest bidder’s bid will be the anchor bid. As part of the Swiss auction, the Reliance-Acre team has the first right to match any counter-offers. The other option that lenders considered was to solicit bids again, hoping to get better deals. ACRE is an Ares SSG Capital-backed asset recovery company.

Regarding the distribution of proceeds, the core group of executives determined that the division of proceeds would be linked to the security held by each lender. An unconventional approach to sharing the proceeds is being proposed to discourage lenders from voting against a plan that could result in liquidation, the lender cited above said.

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