Nicco Corporation's liquidation: Lenders, workmen may have to accept huge haircut on claims

The reserve price for Nicco Corporation’s liquidation exercise has been pegged at Rs 232 crore, which is about 62 per cent of the company’s total dues admitted by the liquidator.

This simply means the lenders and workmen – the second tier of the payment waterfall under any liquidation – will have to accept substantial haircut on their claims.

Banks including State Bank of India has non-performing loans of Rs 325 crore while 650 workmen have about Rs 14 crore admitted claims, according to official documents.

Vinod Kothari, the liquidator appointed by the National Company Law Tribunal, has invited bids from investors Wednesday for offloading the company’s assets and announced that it would be done by way of slump sale, which means all the assets will be sold as a single unit, except for the company’s 25 per cent holding in Nicco Parks & Resorts Ltd (NPRL), where the two West Bengal entities have a cumulative 25.85 per cent interest and have the first rights of refusal.

“The slump sale proposition will try to ensure that the acquirer who comes in is interested to run the units as a going concern. This will ensure the interest of many stakeholders including workmen are better served,” Kothari told ET.

“If the slump sale option fails to bring desired results, we will try to sell the assets of the company in parcels,” he said.

Among lenders to Nicco Corp, the Kolkata-based Allahabad Bank has the second highest exposure at Rs 94.7 crore, followed by Canara Bank’s Rs 44 crore, ARCIL’s Rs 27 crore, Srei Infrastucture Finance’s Rs 24 crore and Central Bank of India’s Rs 19.8 crore. West Bengal Industrial Development Corporation claimed Rs 4 crore.

“The commonest issue in liquidation of a company in bankruptcy is that there is a deep deficit in the value of asset,” Kothari said.

“In most liquidations, the second item in the waterfall (the first one is the costs of the resolution and liquidation process), consisting of secured lenders and workmen, is much larger than the value of assets itself. So, there is nothing left on table for the employees and others,” he said.

Operational creditors including suppliers claimed about Rs 31 crore, while liquidator admitted Rs 5.6 crore worth of claims from 350 employees.

Kothari said under the slump sale proposition, investors can acquire the assets including the 25% share in NRPL or excluding it. The reserve price for the sale excluding the NPRL shares is Rs 185 crore.

NRPL is a joint venture where West Bengal Tourism Development Corporation and West Bengal Industrial Development Corporation together are promoters and any sale needs no objection from them as per the JV agreement signed in 1990 as well as the provisions of the Bankruptcy Code.

Nicco also holds 23.56% of shares in Nicco Engineering Services Ltd.

Kothari said the applicants acquiring the assets on sale will endeavour to run the business of Company after acquisition of the Sale.

NCLT’s Kolkata bench ordered for liquidation of the company on October 17, last year. It had two manufacturing units in Shyamnagar, West Bengal and in Baripada, Odisha. Its assets include office sprawling 62838 sq. ft office spaces at the heart of Kolkata and 1176 sq. ft space in Mumbai, a guest house in Powai and 14 cars.