Varde Capital proposes Rs 1,000 crore equity infusion in Altico Capital

Over a month ago, Altico Capital had presented a resolution plan to lenders.

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Two people with direct knowledge of the proposed equity infusion told ET that Varde Partners would lead the equity infusion initiative.
In a day of mixed developments at stressed home financier Altico Capital, one of its three owners proposed to infuse up to Rs 1,000 crore as equity capital, while the company said its chief executive officer is quitting and would cease to be in that role as early as next week.

Two people with direct knowledge of the proposed equity infusion told ET that Varde Partners would lead the equity infusion initiative. The company is likely to submit a resolution plan at the lenders’ steering committee meeting to be held next week. According to the plan, US-based Varde will repay the lenders in full and seek additional credit lines from them. The financier is also in advanced talks with SBI Capital.

“They may be seeking another Rs 1,000 crore of new loans from lenders as it will collectively help finish all those stalled builders’ projects,” one person said.


Varde Partners declined to comment on the matter. Emails sent to Altico Capital and SBI Capital remained unanswered until publication of this report.

To be sure, one of the existing investors in Altico bonds reportedly sold the debt recently at yields beyond 71 per cent.

Separately, Altico told the Bombay Stock Exchange (BSE) that CEO Sanjeev Agrawal has “tendered his resignation” and that November 26 will be his last working day as chief executive at the lender.
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“In September 2019, Agrawal, who was previously COO of the firm, was requested by the Altico Board to continue at the firm to infuse stability and was subsequently appointed as the CEO of the firm with the full backing of the board in October 2019,” the company said in an exchange filing. “Recently, he was asked to consider extending his contract with the firm for the period beyond March 31, 2020, to which he expressed his inability citing personal reasons.”

Abu Dhabi Investment Council, Clearwater Capital and Varde are the three sponsors of the property-focused financier. The US-based private equity firm owns about 22 per cent, ADIC holds about 33 per cent and the remainder is in the hands of Singapore-based Clearwater Capital.

“With additional equity capital, Varde’s shareholding may not change much as it would look for haircuts from the other two existing shareholders,” said an executive involved in the discussions. The idea is that once the stalled real estate projects are completed and turn commercially viable, they will generate returns for investors and lenders.

Over a month ago, Altico Capital had presented a resolution plan to lenders, which they are considering amid the possibility of new ones coming in. Altico proposed selling some of its biggest loan assets such as Skylark in Bengaluru, Casa Grande in Chennai and Marvel in Pune.
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Mashreq Bank, Yes Bank and Bank of Baroda are among the other lenders in the committee. Over two dozen lenders have lent money to the company. State Bank of India is spearheading the resolution process and lenders are also in talks with other external investors that could bid for the NBFC seeking full control.

SSG Capital, Brookfield, Cerberus and Apollo Global were said to be among private equity investors keen on a stake in the company.
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Altico’s credit exposure is yet to turn into a non-performing asset in bank books. The company has about Rs 800 crore of repayment liabilities until December. Its total outstanding debt stands at Rs 4,361.5 crore.

Monthly cash inflows for Altico remain in the range of Rs 80-100 crore as borrowers make repayments, people aware of the matter said.

In September, Altico defaulted on interest payments of Rs 19.97 crore, causing its liquidity position to worsen.

Local rating companies CARE and India Ratings downgraded the lender’s long-term issuer rating to ‘D’ from ‘A+’ and short-term issuer rating to ‘D’ from ‘A1’ more than two months ago.

Altico and Dubai’s Mashreq Bank approached the Reserve Bank of India, accusing HDFC Bank of violating regulatory provisions by debiting part of the funds that the company had deposited after raising the amount through external commercial borrowings, ET reported on October 13.
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