Lenders vote for equitable distribution of proceeds from sale of Reliance Capital

A majority of Reliance Capital lenders on Monday agreed on equitable distribution of sale proceeds of the company among assenting and dissenting creditors, a move aimed to discourage negative voting on its debt resolution plan, people aware of the development said.

Lenders expect recovery of about Rs 10,090 crore from sale of Reliance Capital, which is below the liquidation value pegged at Rs 12,500-13,000 crore.

Hinduja Group entity IndusInd International Holdings had offered Rs 9,650 crore for the Anil Ambani-promoted financial services company in the extended auction held on April 26, and later agreed to improve the offer by another Rs 10 crore. Reliance Capital also has cash balance of Rs 430 crore that the lenders get to keep, as reported.

As per the Insolvency and Bankruptcy Board of India, dissenting creditors are entitled to receive pro-rate payment as per the liquidation value while the assenting creditors are entitled to receive money from proceeds based on the approved plan. This rule is aimed at discouraging lenders from voting against a plan.

In the case of Reliance Capital, since the liquidation value is higher than the offer, most lenders would prefer to vote against the plan since they would receive higher distribution as dissenting creditors.

Nearly 99% of lenders voted for equitable distribution of proceeds, people cited above said. The voting on the resolution plan will be held next month, they said.