An unprecedented war of words broke out between the Reliance Group, led by Anil Ambani, and the lenders L & T Finance and Edelweiss, with the young Ambani accusing the lenders of illegally invoking compromised actions, calling them “motivated and unjustified”.
The lenders refuted the allegations in their own words by stating that the Reliance Group companies did not meet their contractual obligations and that frequent defaults by the borrower did not allow them more choice.
Shares of Anil Ambani group companies weakened under heavy selling pressure this week after Reliance Communications announced its decision to move the insolvency court for bankruptcy protection. Since February 4, Reliance Communications has fallen 54 percent, Reliance Power has fallen 59 percent, Reliance Capital has lost 32 percent, while Reliance Infra has fallen 56 percent.
The Reliance Group claimed that the sale was “illegal and excessive,” and against the process and documentation requirements of the respective loans.
“The way to carry out sales in the previous open market, without any attempt to order the market through a tender or a structured process for the actions that comprise the holding of the promoter group, is also illegal in several aspects, including price manipulation, “said a group statement, insider information, market abuse, market misuse and market abuse, and violates several regulatory provision that apply to all people ( including the NBFC) that trade with listed securities “.
Nothing illegal about sale: providers
On Friday, the group’s shares gained between 5 and 12 percent.
L & T Finance and Edelweiss defended their actions saying they sold shares promised by law.
“In accordance with the loan and pledge agreements, the borrower (Reliance Group) did not resolve several events of default, including the margin of provision in the stipulated security coverage,” L & T Finance said in a statement. “Despite several warnings in recent months, non-compliance events continued. As a result, L & T Finance asserted its invocation rights and sold committed shares to the extent of its pending fees following the due process of the contract and the law. ”
Edelweiss also said that the sale was motivated by the collapse of the value of the collateral and the failure of the promoters to comply with the contractual obligations. “On February 4, 2019, there was a sharp fall in the prices of the shares of the Reliance ADAG group, which led to further erosion in the value of the guarantees. The Edelweiss group, once again, gave the due opportunity for remediation. Since there was no response from the Reliance ADAG Group, the liquidation of the guarantee was required according to the agreed contractual terms “.
Reliance Group was formerly known as Reliance Anil Dhirubhai Ambani Group (ADAG).
Indian markets have been driven mad in recent weeks by the problems associated with promoters who had pledged their holdings in large listed companies to raise funds for personal investments. The Subhash Chandra of the Zee group recently reached an agreement with the lenders not to trigger the breach and give it time until the month of September to reimburse them and dispose of the assets.
The trigger for the crash was the release of Reliance Communications last Friday, which announced its decision to declare bankruptcy because it has not been able to sell assets to pay off the debt during the last year and a half. The company has a debt of around Rs 42,000 crore. On Monday, RCom approached the National Court of Appeals for Corporate Law (NCLAT) to withdraw its appeal against an Order of the National Societies Law Court (NCLT) of May 2018 that had admitted bankruptcy. The court ruled that RCom cannot sell the movable or immovable property without the permission of the Supreme Court or the court until further orders.—Tech2.Org