CG Power lenders approve Tube Investment’s Rs 700-crore bid

CG Power and Industrial Solutions had reported widening of its consolidated net loss to Rs 288 crore for the quarter ended March 2020.

By Ankur Mishra

The lenders of CG Power and Industrial Solutions have approved `705-crore bid of Murugappa group’s Tube Investments, sources close to development told FE. “No other suitor could outbid Tube Investment’s offer during the Swiss Challenge, so we have approved the resolution plan of existing bidder,” the source added. CG Power has a total outstanding debt of Rs 3,024 crore as on June 30, 2020. The lead creditors include State Bank of India (SBI), Axis Bank, Yes Bank, IndusInd Bank and Bank of India, among others.

Lenders had earlier invited more resolution plans to challenge the existing bidder under Swiss Challenge method. Lenders use a swiss challenge method for value maximisation, in which a new suitor can challenge the existing bidder by quoting a higher amount for the company.

As per the resolution plan, termed as Securities Subscription Agreement (SSA), CG Power will sell 64.25 crore shares to Tube Investments at Rs 8.56 each for Rs 550 crore. This transaction will give Tube Investments 50.62% stake in CG Power. Tube Investments will also be allotted 17.52 crore warrants, convertible to an equal number of shares within 18 months from the date of allotment, for Rs 150 crore. After the conversion of the warrants, the Tube Investments stake in CG Power will increase to 56.61%.

The Avantha group firm has called an extraordinary general meeting (EGM) on September 2 to take shareholders’ approval on the resolution plan.

Lenders had earlier signed an inter-creditor agreement (ICA) on August 11 to resolve CG Power under June 7, 2019, circular of Reserve Bank of India (RBI). The power generation company had been defaulting on payments since August 27, 2019. FE learned that company has defaulted on loan payments of Rs 1,023 crore till June this year.

CG Power and Industrial Solutions had reported widening of its consolidated net loss to Rs 288 crore for the quarter ended March 2020, compared to net loss of Rs 189 crore in the same period last year. Total income fell to Rs 637 crore, compared to Rs 2,006 crore in March, 2019.

Last year, the company had informed stock exchanges that an investigation by an independent law firm had found that some employees had carried out unauthorised transactions. The company said that total liabilities may have been potentially understated by Rs 1,053.54 crore for CG Power and Rs 1,608.17 crore for the whole group.