- Wealth PMS (50L+)
The DCHL woes have no end – actually, now it’s the woe of the bankers to Deccan Chronicle Holdings Limited that are crying now.
BCCI – the cricketing body that controls the IPL 20-20 series – has cancelled the contract of Deccan Chargers, the IPL team owned by DCHL. This comes after Deccan Chronicle rejected the 900 cr. bid by PVP Ventures, a shady company that has been
Let’s take a look at the timeline.
July 4: CARE downgrades Deccan Chronicle debt after it defaults on a set of NCDs due on Jun 29 or so. I wrote a post on the issue (HT: Dheeraj Singh) and then, the stock was still quoting at Rs. 32. Things went downhill from there.
July 29: The CEO Resigns. The stock tanks to Rs. 18. News is that they have defaulted on more debt payments, and salaries to the Deccan Chargers team have not been paid.
Aug 2: The Lenders come out of the woodwork. Turns out the DCHL promoters may have double-pledged their shares to cover very large loans.
Sep 12: While the company has applied for Corporate Debt Restructuring, Canara Bank, the first lien holder of some assets is conducting a forensic audit which might reveal irregularities in fund use and any multiple liens on the same assets. The CDR proposal has been moved to Sep 26, when the lenders will decide.
Sep 13: DCHL rejects the Deccan Chargers bid by PVP capital of Rs. 900 cr. The Bid had the blessing of the BCCI and was the only bid for the tender. DCHL’s lenders demanded a bank guarantee fo Rs. 450 cr. which was supposedly not forthcoming from the buyer, so the lenders forced DCHL to reject the bid.
Sep 14: BCCI Cancels the Deccan Chargers contract. DCHL has no team left to sell. Bankers are screwed.
Bankers will attempt some recovery but it seems they have mortgaged everything, including their trademarks. Given that estimates of secured plus unsecured debt go to over 5,000 crore, there is potential fraud and other complexities, it is hugely unlikely that much of the money will ever be recovered.
For banks the time of reckoning is very soon – if they haven’t been making interest payments since June, then September end is when the 90 day period will be over and they will have to recognize DCHL payments as an NPA. Most banks will request time to have to recognise the full NPA, and RBI is likely to oblige – so they will have to provision for the losses over the subsequent two years or such. (Without the RBI nod, they’ll have to recognize the full loss by either next June or next December) Meanwhile recovery proceedings will continue.
But I think the banks will try to pass this off as a "restructured" loan rather than a default, even though there is not even a hope in hell that the company will pay back all its obligations. But strange things have happened, especially with surnames like Raju and Reddy.