Lenders assign GSML debt to ARC

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Argus Partners advised a Garden Silk Mills (GSML) consortium of lenders, led by Bank of Baroda, on the resolution of its stressed assets and account under the Reserve Bank of India’s (RBI) circular dated 7 June 2019.

As part of the resolution plan, the lenders of GSML assigned the consortium debt of ₹16 billion (US$221 million) in favour of an asset reconstruction company (ARC), including the auction process for selecting the proposed assignee.

This was of significance as one of the first few resolutions under the RBI’s 7 June circular. This circular replaced the earlier circular issued by the RBI on 12 February 2018, which was deemed unconstitutional by the Supreme Court. It was one of the most highlighted issues in the banking space in 2019, Aastha, Argus Partners’ lead partner on the insolvency, told India Business Law Journal.

Aastha’s team comprised Prakash Panjabi, a senior partner, who advised on certain aspects of the transaction, as well as associates Shradha Rakhecha and Kartik Jigyasi.

“Garden Silk Mills is a textile manufacturing company that is most well-known for producing the iconic saree brand Garden Varelli,” said Aastha. “Garden Silk had been going through a financial crisis since around early 2019, and the lenders had been considering various options for resolution of the account.”

Argus Partners advised Bank of Baroda and the other lenders on the entire resolution process. Providing insight into the insolvency market, Aastha said: “With most of the large accounts having been resolved under the Insolvency and Bankruptcy Code, 2016 (IBC) in 2018 and early 2019, there has been a spur in the resolution of stressed accounts outside the IBC as well. As per news reports, stressed accounts of approximately ₹3 trillion are undergoing resolution under the RBI’s 7 June circular.”

She added: “The other key developments in the insolvency space include the insolvency/bankruptcy framework for personal guarantors coming into force and systemically important NBFCs [non-banking financial companies] having an asset size of ₹5 billion or more being brought under the IBC framework.” The ARC was advised by Nishith Desai Associates.