KSK Mahanadi Power loan: SBI to Swiss auction KSK loans

Mumbai: () on Tuesday evening decided to hold a Swiss challenge auction of ₹3,815-crore KSK Mahanadi Power loan after receiving a solo offering from Aditya Birla Asset Reconstruction Company at an auction held on Monday.

The bank decided to hold a Swiss auction to avoid glare from investigative agencies in future, a bank executive said on condition of anonymity. “The bank would not like to be questioned for selling loans without attempting to get the best offer,” the person said.

Aditya Birla ARC‘s ₹1,544-crore offer will be the anchor bid for the Swiss challenge. If the bank receives any counteroffer, Aditya Birla ARC, which was declared the highest bidder at the auction, will have the right to match it. Since this auction was the single biggest distressed loan sale on an upfront payment basis by any lender, SBI decided to follow the Swiss auction, the person cited above said.

SBI has invited expressions of interest on June 2 and will hold a Swiss auction on June 21, according to a notice posted on the bank’s website.

What surprised bankers and the ARC industry is that the bank had not informed in its auction notice on May 20 that it would hold a Swiss auction.

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Aditya Birla ARC’s offer, which is supported by its joint venture partner Varde Partners, equates to a recovery of 40% on KSK Mahanadi’s outstanding loan from SBI. Since the bank has fully provided the loan, sale proceeds will help it shore up its earnings for the quarter ending June.

Upon acquiring SBI loans, the ARC would gain control over 34% of KSK Mahanadi Power’s loans, a critical level needed under the Insolvency and Bankruptcy Code (IBC,

“The timing of SBI’s proposed loan sale of KSK Mahanadi indicates lenders are no longer confident of timely resolution under the IBC-driven process,” said a lender who requested not to be identified.

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