Banks recover ₹6,000 crore in Prayagraj sale

Mumbai: A consortium of 18 lenders, led by State Bank of India (SBI), have successfully recovered ₹6,000 crore from the sale of the debt-laden Prayagraj Power Generation Co in the second such one-time settlement deal outside of the bankruptcy mechanism, raising expectations of financial revival for completed power projects.

Resurgent Power bought Prayagraj in a deal that will bring for banks ₹1,300 crore in equity investments Rs ₹4,700 crore in the shape of borrowings and other sources.

“The borrowings will be funded by SBI which will then sell it down to other banks. There are many banks that have queued up to be a part of this loan; so it should not be a problem to sell it down,” said a person familiar with the deal.

Financial creditors took a 52 per cent haircut on their ₹12,500 crore of loan exposure to the company. “We have received the money in our bank accounts today, so we can officially say the deal is now closed.

There were some hiccups along the way and it took some time, but we think we have got the best deal in the current circumstances,” said a banker closely involved in the restructuring.

This is the second such resolution outside the bankruptcy code after GMR Chhattisgarh Energy (GCEL) was sold through a similar process in August 2019. Banks, led by SBI, were keen to secure the one-time settlement because there have not been many buyers for power assets under the Insolvency and Bankruptcy Code (IBC).

The share purchase agreement for this deal was signed in November last year and it received the competition commission approval in December last year. But the deal was stuck after the UP Power Corp Ltd (UPPCL) sought lower tariffs from the new owner, arguing that the company’s debt would reduce after the deal.

Resurgent Power is a joint venture involving Tata Power, ICICI Bank and international investors Kuwait Investment Authority and the State General Reserve Fund of Oman. The company will take a 75 per cent stake in Prayagraj in a one-time settlement. Lenders will still hold about 15 per cent in the company, while the residual 10 per cent will be with the original promoter, Jaiprakash Associates.

Prayagraj operates a 1,980-MW power plant in Uttar Pradesh. It has a power purchase agreement with UPPCL, the company responsible for transmission and distribution of electricity within that state.