Encore ARC acquires IndoStar Capital's distressed loan book of Rs 292 crore
IndoStar Capital Finance sold Rs 292 crore stressed asset portfolio to Encore Asset Reconstruction Company in a deal which involved a senior-junior structure between the buyer and the seller, said people with knowledge of the matter.
The senior-junior structure is rarely used between an ARC and a seller (banks or finance companies), with regulators discouraging such structures in AIF transactions.
Encore ARC had given a binding offer of Rs 271 crore to IndoStar Capital’s Rs 292 crore loan portfolio in the form of a senior junior structure. The offer by Encore ARC triggered a Swiss Challenge auction.
Mid of December, IndoStar had invited counteroffers — under senior-junior structure — from other ARCs.
Edelweiss ARC had given a counter offer which was about 6-7% higher than the anchor offer, said people cited above.
Encore ARC matched Edelweiss ARC's offer and was declared as a successful bidder.
On paper, Encore has offered to pay almost full money, but the actual cash payment will be made based on its recovery.
The structure has a senior class involving cash payment and a junior class involving cash and security receipts.
In this case, the senior class comprises 38-40% of the principal amount which Encore will pay as upfront cash. The junior class which is 60-62% of principal loan, is split into cash and security receipts.
