Union Bank to sell KSK Mahanadi loan

Other lenders including State Bank of India,

, (BoB) and have already sold their debt in the company that owns a 3,600-mw power plant and has been under a prolonged insolvency process.

UBI has set a reserve price of ₹919 crore in cash for its exposure. At this price, it will recover 44% of the outstanding amount (a 56% haircut). The last date for expression of interest from buyers is August 31, which will be followed by an electronic auction on September 1.

The company has admitted claims of ₹29,501 crore from lenders.

“The bank has put up the loan for sale because there has been no progress in the recovery through the National Company Law Tribunal (NCLT) for many months. So, it is better to take the cash on offer than wait for recovery,” a person familiar with the process said.

Last week,

announced that Aditya Birla ARC bought its ₹3,815 crore loan to KSK Mahanadi Power for ₹1,622 crore, accepting a haircut of almost 58% against its total outstanding.

Aditya Birla ARC currently owns 34% of the debt of the company, after buying loans from Axis Bank, BoB and in the last two years. With UBI’s almost 10% debt, the ARC can claim control of 44% of the company’s debt, giving it a veto over any debt resolution. It is expected that the ARC will place a bid for UBI’s debt.

Mumbai-based ASREC ARC and Prudent ARC of Delhi also have bought the company’s debt from banks, but own less than 5% each.

Banks are selling their debt in KSK Mahanadi after failed attempts in the past nearly three years to execute an insolvency process for the company.

KSK Mahanadi is part of the debt-laden, Hyderabad-based KSK Energy Ventures. The company was admitted to the bankruptcy court in October 2019 after a case filed by Power Finance Corp to which the company owed ₹3,300 crore, according to its website. Lenders have been trying to find a resolution for the distressed plant even before taking it to the NCLT. A deal to sell the plant to the Adani Group fell through in 2019.