India: Essar verdict may drive more investments into distressed assets space

Image from Essar website

The recent verdict of the Supreme Court on Essar Steel’s insolvency resolution process, which upheld the primacy of secured creditors, will drive global investments into India’s distressed assets market as it will expedite the litigation process, said Rahul Chawla, managing director at Deutsche Bank India.

“It sets the sanctity of the capital structure in place. There is a logic by which a secured creditor is secured and an unsecured creditor is unsecured. So, I think (Essar judgement) puts to rest the fact that its sanctity is preserved and I think the bigger benefit of all of this is that it also puts to rest the debate about the role and responsibility of the committee of creditors (CoC) and thereby the whole Insolvency and Bankruptcy Code (IBC) law,” Chawla said in an interview.

On 15 November, Supreme Court overturned a 5 July judgement by the National Company Law Appellate Tribunal (NCLAT) which gave parity to operational creditors and financial creditors for distribution of resolution proceeds. In its Essar Steel judgement, the apex court gave precedence to secured financial creditors over unsecured operational creditors, paving the way for future insolvency cases. Chawla said while the Essar Steel resolution took more than two years because of multiple litigations at different levels of the judiciary, the final outcome settles the law around several important issues, which is an encouraging sign for investors in distressed assets.

“I think every law needs to go through a certain process, but with this (Essar Steel verdict), the fact that the CoC is supreme, the fact that the capital structure prevails, gives every investor a lot of confidence that this (IBC) is not something which will keep getting diluted,” said Chawla.

IBC, combined with a central bank that is pushing the banking sector to clean up its balance sheets, has already attracted several distressed asset investors. Resolution of large insolvency cases such as Essar will only help to increase the interest from such investors.

On Wednesday, Canada Pension Plan Investment Board (CPPIB) said that it is investing $225 million into India Resurgence Fund, a stressed asset investment platform sponsored by the Piramal group and private equity firm Bain. Several global investors such as KKR, Hong Kong-based SSG Capital Management, Lone Star Funds, Cerberus Capital and Canada’s Brookfield Asset Management Inc. are already present in India and vying for opportunities.

Deutsche Bank itself is betting big on the distressed space in India. With a global distressed assets platform managing billions of dollars of stressed loans, it believes it has the experience and the right strategy in place to succeed in the growing Indian distressed market.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.