GVK Power Faces Insolvency Proceedings for Unpaid Loans

GVK Power and Infrastructure Ltd (GVKPIL) will undergo insolvency proceedings due to loan defaults. The National Company Law Tribunal issued the order based on a petition by lenders led by ICICI Bank. The loan, initially taken by GVK Coal Developers, was guaranteed by GVKPIL. The company owes lenders over USD 1.84 billion.

GVK Power and Infrastructure Ltd (GVKPIL) will undergo insolvency proceedings after failing to repay loans to lenders, following a corporate insolvency court's decision.

The Hyderabad bench of the National Company Law Tribunal (NCLT) issued the order upon a petition by a lenders' group led by ICICI Bank Ltd, the company disclosed in a stock exchange filing.

Originally, GVK Coal Developers (Singapore) Pte Ltd had availed the loan over a decade ago, with GVKPIL serving as the guarantor.

On July 12, the NCLT bench issued the order, which was made public Monday. ICICI Bank filed the petition in 2022.

The NCLT appointed Satish Kumar Gupta as an interim resolution professional to manage the company during the insolvency process.

The corporate debtor acknowledged its liabilities and corporate guarantee in annual reports from FYs 2018-19, 2019-20, and 2020-21. As of June 13, 2022, the debtor owed USD 1.84 billion, including USD 1.13 billion principal, USD 731.57 million interest, and USD 144,000 in agency fees, according to the NCLT order revealed in the stock exchange filing.

Senior counsel K Vivek Reddy, representing ICICI, cited a London court judgment from October of the previous year to support insolvency proceedings against GVKPIL.

The first default occurred in February 2017 and remains unresolved. GVKPIL, as the guarantor for GVK Coal's loan, is liable. The London court confirmed this liability, and given GVK's payment failure, bankruptcy is deemed necessary, he stated.

In September 2011, ICICI Bank (Dubai, Bahrain, and Singapore branches), Bank of Baroda (Ras Al Khaimah), Bank of India (London and Singapore), and Canara Bank (London), sanctioned a term loan facility of Rs 8,356 crore and a letter of credit for Rs 292 crore to GVK Coal for acquiring Australian coal mines. Additional term loans of Rs 367 crore were sanctioned by other banks in March 2014 and later increased to Rs 2,089 crore.

In March 2016, ICICI Bank found that GVK Group intended to sell its stake in Bangalore International Airport Ltd without lender consent, breaching the facility agreements.

Banks filed for an injunction in a London court in April 2016, which resulted in GVK pledging not to sell its Bengaluru airport stake.

Due to continued nonpayment, lenders filed claims in the London court for Rs 5,915 crore under facility agreement-I and Rs 1,236 crore under facility agreement-II. In November 2020, ICICI Bank demanded Rs 5,000 crore towards principal and interest from GVKPIL. GVKPIL admitted its inability to pay but promised to negotiate a solution with the Adani Group, requesting the bank abstain from action.

However, ICICI Bank approached the NCLT in 2022, leading to insolvency proceedings against GVKPIL. On July 12, the NCLT determined that GVKPIL owed Rs 15,576 crore as of June 13, 2022, including Rs 9,463 crore in principal, Rs 6,113 crore in interest, and Rs 1.23 crore in agency fees.

(With inputs from agencies.)