Mauritius Court Orders Freeze on Shiv-Vani Oil's Onshore Assets as It Failed to Redeem Bonds Worth $84 Millon

8 years, 1 month ago - April 18, 2014
MUMBAI: Mauritius' top court has ordered a freeze on all onshore assets of Delhi-based Shiv-Vani Oil & Gas Exploration Services for failure to redeem $84 million (Rs 600 crore) worth of bonds.

Onshore drilling rig operator Shiv-Vani's foreign currency convertible bonds (FCCBs) were due in mid-2013. Its offshore lenders had approached the Supreme Court of Mauritius after the company defaulted on payment. A petition was moved by Citicorp International on behalf of the bondholders.

"Freezing the assets of the respondent (Shiv-Vani) that are located in Mauritius, including the shares held by the respondent in the Mauritian subsidiaries," the court said in a two-page ex-parte order issued on April 11. A copy of the order was seen by ET.

The court has also restrained Shiv-Vani from creating any securities or disposing its assets and given it time until May 30 to submit its reply.

Shiv-Vani did not respond to emailed queries sent by ET seeking information on the development. The company has eight subsidiaries— four in India, two in Mauritius and one each in Singapore and Oman.

Founded in 1989, Shiv-Vani had expanded aggressively by acquiring drilling rigs, adding enormous debt on its books. The business became unsustainable when some of the expected contracts got delayed and a few of its assets stayed idle.

The interim order follows a February 11 order by the High Court of Justice, London, which said that if the Indian company fails to fulfill its obligation, lenders could approach other jurisdictions, including Mauritius, to freeze the company's assets.

The London court had also ordered Shiv-Vani to clear its FCCB dues on or before February 24 along with $2.2 million as interest. Further, Shiv-Vani was directed to pay GBP 2.1 lakh  to the petitioners as legal cost and $11, 998 per day from February as default interest till the date of payment.

The court had also declined the company the right to challenge the order in a higher court.

Acknowledging the London court's order, the company had written to the BSE on February 20 saying, "The Company is proposing to file appeal against the said judgment within the prescribed period of limitation and also seek stay of the judgment."

Yogesh Chande, consultant at law firm Economic Laws Practice, said, "This order sets a precedent for other Indian companies which have issued FCCBs and which, if not restructured by these issuer companies at manageable costs, could even erode the reputation of Corporate India in the global FCCB market."

Shiv-Vani had informed the stock exchanges on March 6 that its corporate debt restructuring (CDR) has been approved and the company is in the process of finalising a master restructuring agreement in consultation with the CDR lenders.

According Chande, recovery estimates are typically driven by the expected liquidation value and operational viability of the underlying business. "In the present matter, it appears that the Mauritius subsidiary of Shiv-Vani is perhaps more lucrative to the petitioner (Citicorp, in the present case), as compared with the other subsidiaries of Shiv-Vani that are located in India, Oman, Cyprus and Singapore," Chande said.

According to the current shareholding pattern of the company, Templeton Strategic Emerging Markets Fund owns 8% in the company, Citigroup's PE arm, CVCI, holds close to 6% and Srei Equipment Finance holds 3.67%. On Wednesday, company's stock closed 3.04% lower on BSE at Rs 15.


Text by The Economics Times

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