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HDFC, Axis Bank sold Reliance Capital debt facilities to ACRE

A few months before the Reserve Bank of India (RBI) superseded the board of (RCap), Ares SSG Capital-backed Assets Care & Reconstruction Enterprise (ACRE) acquired debt facilities from HDFC and Axis Bank at 27-28 paise on a rupee.

ACRE, an asset reconstruction company, purchased a ₹524-crore term loan from housing finance company HDFC Ltd and a ₹100-crore term loan and ₹490-crore non-convertible debentures (NCDs) from Axis Bank, the people said. Both trades were carried out on an all-cash basis, one of the persons cited above said.

HDFC and Axis Bank were the only two lenders that had provided term loans to RCap, according to the company’s annual report for the financial year March 31, 2021.

The Anil Dhirubhai Ambani Group-promoted finance company has total liabilities of ₹19,123 crore.

Axis Bank sold two 8.85% NCDs maturing in 2026 amounting to ₹488.2 crore and one 9% NCD maturing in 2026 of ₹1.85 crore to Assets Care & Reconstruction in the secondary bond market in October.

Default Category

The trade with HDFC was concluded in June, the people cited above said. HDFC had an outstanding loan of ₹524 crore and interest overdue of ₹79 crore as of March 31, 2021.

HDFC, Axis Bank and ACRE did not respond to the request for comment. The debt facilities of RCap were downgraded to D – indicating default category – in September 2019 by CARE Ratings, when it missed payments on NCDs.

RCap, having been in default for over two years, saw its board superseded on Monday. In a statement, RBI said it had done this given the “defaults by Reliance Capital in meeting the various payment obligations to its creditors, and serious governance concerns, which the board has not been able to address effectively.” The company’s total liabilities include NCDs of ₹16,260 crore, term loans of ₹625 crore and inter-corporate deposits of ₹561 crore. It has also issued a corporate guarantee of ₹1,677 crore.

In June last year, ET reported that Deutsche Bank had purchased ₹565 crore of Reliance Capital bonds at a discount of 70% in the secondary market through seven transactions.

RBI will approach the National Company Law Tribunal between Friday and Monday to admit the finance company for corporate insolvency resolution process, one of the persons cited above said. Y Nageswara Rao, a former executive director at Bank of Maharashtra, has been appointed administrator of RCap. The ADAG-promoted Reliance Capital is registered as a core investment company with RBI, with investments in general and life insurance, asset management, stockbroking, housing finance, wealth management and asset reconstruction.

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