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    Ahmedabad company makes a binding offer for Rainbow Papers' loans

    Synopsis

    As per the terms of the offer, six lenders have jointly agreed to sell their outstanding debt of ₹873 crore for ₹160 crore, equating to a 18% recovery for the lenders. Rare ARC will have the first right to match the counteroffer, if any.

    Ahmedabad Co Makes a Binding Offer for Rainbow Papers’ LoansAgencies
    Distressed market players are surprised that the consortium of lenders accepted a bid having an SR component from a private player.
    Mumbai: A little-known Ahmedabad-based Rare Asset Reconstruction Company has given a binding offer for the loans of Rainbow Papers - a company that was on the radar of government-promoted National Asset Reconstruction Company Ltd (NARCL) for over a year now, said two people aware of the development.

    The ₹160-crore binding offer by Ahmedabad-based Rare ARC to banks led by Indian Overseas Bank has triggered a Swiss Challenge auction, the people said.

    As per the terms of the offer, six lenders have jointly agreed to sell their outstanding debt of ₹873 crore for ₹160 crore, equating to a 18% recovery for the lenders. Rare ARC will have the first right to match the counteroffer, if any.

    Rare's offer is a combination of cash and security receipts, wherein ARC will pay 15% of the consideration upfront, and for the remaining amount, it would issue security receipts payable on recovery of the loan.

    Rare ARC did not respond to ET's request for comment.

    NARCL has been in talks with lenders for over a year to acquire the loans of Rainbow Papers, but the deal was delayed due to differences over the pricing of the loan.

    Distressed market players are surprised that the consortium of lenders accepted a bid having an SR component from a private player.

    Over the last few years, lenders have refrained from accepting 15:85 structure deals and have insisted on a cash deal since many ARCs have failed to redeem the SRs within the stipulated eight year timeframe. However, they accepted SR only from NARCL since it has a sovereign guarantee.

    In Rainbow's case, to allay lenders' concerns over timely redemption of SRs, Rare ARC has issued a bank guarantee against the SRs amounting to ₹136 crore, the people cited above said.




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    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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