Edelweiss said to seek to wind up Bharati Defence under new law

[MUMBAI] Edelweiss Asset Reconstruction Co, India's largest bad loan buyer, plans to request a winding up of Bharati Defence & Infrastructure Ltd under the country's new bankruptcy law, according to people with knowledge of the matter.

The company aims to file a petition in about a month against the Mumbai-based shipbuilder, whose shares have fallen more than 50 per cent in the last 12 months, said the people, who asked not to be identified because the information is private. Bharati Defence has outstanding debt of about 90 billion rupees (S$1.88 billion), of which Edelweiss holds 85 per cent, the people said.

A filing with the National Company Law Tribunal will help Edelweiss restructure the company and recover loans without also having to seek the approval of Bharati's other lenders, the people said.

The tribunal was created in June after India's parliament passed the new bankruptcy code that unified overlapping sets of rules and cut the time it takes to wind up dying companies and recover debts. The law prescribes 180 days to settle bankruptcies and empowers insolvency agencies to sell assets to repay creditors.

Bharati shares fell 2.4 per cent to 16.60 rupees at the close Wednesday in Mumbai. Vijay Kumar, managing director at Bharati Defence, didn't respond to mobile-phone calls and text messages seeking comment. Mona Kwatra, a Mumbai-based spokeswoman for Edelweiss, declined to comment.

Asset reconstruction firms like Edelweiss buy so-called bad loans and collateral from lenders and work on recovery by revamping businesses and assets. Edelweiss manages about 650 billion rupees of bad loans, including the debt of Essar Steel Ltd, Binani Cement Ltd and Karaikal Port Pvt, the people said.

BLOOMBERG