Another IBC Success: NCLT Approves JK Paper’s Rs 371 Crore Bid For Debt-Ridden Sirpur Paper Mills

Providing closure to the long-standing insolvency resolution case of Sirpur Paper Mills, the National Company Law Tribunal (NCLT) yesterday (19 July) admitted the Resolution Plan submitted by JK Paper, one of India’s largest paper producers.

JK Paper said in a regulatory filing that the NCLT has approved its Rs 371-crore bid for the debt-ridden Sirpur Paper Mills.

"The Hyderabad Bench of NCLT has on July 19, 2018, approved the Resolution Plan submitted by JK Paper for acquisition of the Sirpur Paper Mills Ltd (SMPL) under the Corporate lnsolvency Resolution Process," JK Paper said.

As per the terms of the Resolution Plan, Rs 371 crore will be paid towards settlement of financial creditors, corporate insolvency resolution process cost, admitted operational creditors, workmen and employee dues, etc. The Plan is binding on JK Paper, SPML, its employees, members, creditors, guarantors and all other stakeholders involved, as per the provisions of the lnsolvency and Bankruptcy Code.

The Rs 371-crore deal consists of cash payment of Rs 166 crore and the issue of securities of Rs 205 crore by SPML, which JK Paper intends to invest through itself and/or its eligible subsidiaries.

Earlier this year, lenders had approved the resolution proposal of JK Paper to revive Sirpur Paper Mills, as per an Economic Times report in May.

A Resolution professional had placed the developments before the NCLT Hyderabad bench, along with the approval of Committee of Creditors (CoC) for the plan of JK Paper. JK Paper had submitted a resolution plan involving a total outlay of Rs 782 crore, which included settling dues of Rs 371 crore against claims of around Rs 674 crore. Further, the resolution applicant had also proposed investments of Rs 400 crore to expand the capacities of Sirpur Paper in two phases.

The five-member CoC, led by IDBI Bank, had, at a meeting held on April 30, approved the Resolution Plan. The other lenders in the committee included State Bank of India, Central Bank of India, Andhra Bank and Syndicate Bank. The resolution plan of JK Paper was approved by lenders with 80.66% voting in favor  of it.

Sirpur Paper Mills was one of Telangana’s largest manufacturing facilities from the Nizam era that the state government had been attempting to revive through several incentives and subsidies such as GST reimbursement, stamp-duty exemption, capital subsidy on investment, interest subvention and electricity duty of over 10 years, among others.

A senior official in Telangana was quoted as saying that this was probably the first time in the country that a state government has proactively collaborated with the resolution professional appointed by NCLT to help revive an ailing company. Reportedly, state Industries Minister KT Rama Rao had led delegations to meet the IDBI Bank chairman as well as Kolkata-based Bangurs to see if the promoters of West Coast Paper Mills could help revive Sirpur Paper.