Lenders eye Subhash Chandra non-compete windfall

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IndusInd Bank, Axis Finance, Yes Bank and Jammu and Kashmir Bank are among the major lenders that have provided loans to several private companies controlled by Chandra. Some of those loans were backed by Chandra’s personal guarantees, the people quoted above said.

“Lenders can file a motion (in the National Company Law Tribunal) saying that the non-compete money that developers receive, that money should be used to repay the lenders. But stopping the deal between Zee and Sony is difficult,” said one of the people quoted above, who works with one of Essel’s NBFC creditors. “If one creditor moves the court, others will too. most cases the value of security has gone down,” he added.

“Banks can seek an escrow-type arrangement where the non-compete payment made by Sony to the developers is deposited into the account and used to repay the banks,” said the second person, an IndusInd Bank executive.

On Jan. 18, Mint reported that a subsidiary of Axis Bank last month sent a formal notice to Zee and its promoters demanding repayment of 146 crores. Axis Finance said it would oppose the Zee-Sony merger if Chandra and his son Puneet Goenka failed to repay dues as promised.

A spokesman for Subhash Chandra said disputes over lenders would not affect the Zee-Sony merger. “Essel promoters have been settling debt to their lenders since January 2019 and have sold their stakes in all the businesses to secure the same. Although there have been settlements reached with a few, disputes are ongoing with some lenders in various legal forums. We do not comment on details as these are confidential bilateral matters. Such promoter loan arrangements have no connection with Zee Entertainment, and thus such proposed actions are frivolous against the Zee Sony merger.”

According to the investment agreement between Zee Entertainment and Sony Group, SPE Mauritius, a Sony Group company, will pay approximately 1,100 crore to Essel Mauritius, a promoter entity of the Essel Group. The founders of Zee will use the funds to increase their stake in the merged entity by approximately 2%. Essel Group will inject this liquidity into Zee Entertainment at 300 per share. On Friday, shares of Zee Entertainment fell 6.21% to 289.40 on BSE.

IndusInd Bank and Yes Bank are separately fighting Zee for non-refund of dues in various high courts. These lenders hold various securities, including shares of Zee or Dish TV or letters of comfort against the loans made to Chandra.

Spokespersons for Zee Entertainment, Yes Bank, L&T Finance, Clix Capital, IndusInd Bank, Axis Finance and J&K Bank declined to comment.

“When the value of collateral held by creditors collapsed three years ago, Chandra, in a public meeting, agreed to give his personal guarantee. Minutes are being recorded,” the NBFC executive said.

On December 22, Zee and Sony jointly announced that they had completed a three-month due diligence process as part of the first step in the merger of the two giants to create the country’s largest listed media and entertainment company. Interestingly, in accordance with their agreement, Sony will pay this non-compete indemnity to Essel Mauritius, an overseas subsidiary.

Zee obtains approvals from regulators, including the Ministry of Information and Broadcasting and the Competition Commission of India, before formally approaching NCLT.

“The only way to reclaim our dues now is to ask NCLT not to approve the merger until our dues are paid,” said a Yes Bank executive, who also spoke on condition of anonymity. “We’ll wait for the merger to come before NCLT, and then we’ll file a motion.”

The decision by creditors to collect loans to Essel Group entities highlights Chandra’s claim last year that it had paid 91.2% of its financial creditors.

“I am pleased to report that we have emerged from the financial crisis situation by settling 91.2% of our total debt to 43 lenders across 110 accounts,” Chandra wrote in his second open letter dated August 3, 2021.” The amount of 88.3% has been paid, while the remaining 2.9% is in the process of being paid. We are making every effort to settle the remaining 8.8% of our total debt. I have no regrets to part with substantial ownership in the business and especially in the ‘crown jewels’. This was done to preserve the honor of the family,” he wrote.

“Unfortunately, there could be a case (a lender), where there are disputes and both parties seem obsessed with their belief about the number of debts claimed and payable. The difference in numbers, in this case, is huge. The issues are pending before the court(s) for determination,” Chandra wrote.

The anonymous lender turns out to be Yes Bank, which is trying to oust Chandra’s younger brother, Jawahar Goel, from Dish TV India Ltd, because Chandra’s loans from Yes Bank were secured by shares in the company. satellite television. As Chandra and Essel Group could not repay the loan, Yes Bank invoked the pledged shares and became the largest shareholder in Dish TV.

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