McLeod Russel in exclusive talks with Carbon Resources for OTS to lenders

McLeod Russel India, the country’s largest bulk tea producer and part of the B K Khaitan group, said on Saturday that it had approved the execution of an ‘exclusivity agreement’ with Carbon Resources for a one-time settlement (OTS) of debt to lenders.

In a filing, McLeod said that the board had considered and approved the execution of an exclusivity agreement with Carbon Resources for a period of 60 days to exclusively discuss, negotiate and evaluate a mutually agreeable mechanism for the company to offer a proposed one-time settlement of the debt to its identified lenders pursuant to a debt resolution process to be undertaken by the lenders as per the Reserve Bank of India’s Prudential Framework for Resolution of Stressed Assets dated June 7, 2019.

The agreement expresses the parties’ interests in continuing exclusive discussions in the matter and does not create any legally binding obligation on any party, it added.

The move comes four months after Carbon Resources picked up a 5.03 per cent stake in McLeod Russel and made a hostile bid to take a controlling stake in the company. The Jalan-owned company had approached bankers with a non-binding letter of intent (LoI) in September to settle dues of the tea producer. The Khaitans were in the middle of finalising debt resolution with the banks then.

Sources close to the development indicated while discussions with the promoters were on for debt restructuring, the banks requested to also consider a one-time settlement following the non-binding LoI from Carbon Resources.

Restructuring was a combination of monetisation on assets, promoter funding, debt funding and rescheduling the repayment period. The bank debt is understood to be in the range of Rs 1,600 crore.

Though the OTS figure has not been finalised, it is expected to be in the range of Rs 1,000-1,100 crore. Discussions with banks are expected to commence now that the Khaitans and Carbons have agreed on an exclusivity agreement for the transaction.

The figure for the OTS would determine the final contours of the deal – whether it would be just garden sale or a combination of garden sale and equity.

McLeod Russel India’s crop stands at about 44 million kg (mkg) across 33 estates. The total production is about 70 mkg across India, Africa and Vietnam.

Sources however indicated that for the deal with Carbon to go through, a settlement with lenders – KKR, IL&FS and Aditya Birla Finance – at the holding company level, would be required as there was a stay on disposal of assets. Discussions on that front are believed to be on.