MUMBAI: Bank of Baroda (BoB) has cut an unusual property deal with Kohinoor Mills, which owns a prized property in Mumbai. In a cashless transaction, the bank has acquired a slice of prime space at Kohinoor Mills aimed to settle the loan taken by the company that is owned by former Maharashtra Chief Minister Manohar Joshi. The agreement has a clause that the nationalised bank will have the option to sell it back to Kohinoor Mills three years later.
The unconventional transaction, which has raised eyebrows in banking circles, will help the bank avoid tagging the Rs.90 crore unrecovered loan as a non-performing loan. As far as Kohinoor is concerned, it would escape the defaulter tag and would be better-positioned to borrow from other lenders to complete their project.
Kohinoor CTNL Infrastructure Company had acquired Kohinoor Mills in an auction way back in 2005 for Rs.421 crore. Close to 26 lakh sq ft can be constructed on the erstwhile mill while it would also house residential and commercial properties as well as a hotel. As per the deal, the bank has acquired 40,909 sq ft of space in the commercial property to settle its Rs. 90 crore dues.
Speaking to ET, senior officials from Kohinoor CTNL confirmed the development. In an email response to ET, BoB said, ” As a policy, we do not comment on individual client’s details.” The move to enter into a buyback arrangement has surprised lenders since a few months ago, the RBI had directed banks to refrain from sale and lease back of assets as this would tantamount to restructuring of the loan and thus to be classified as non-performing loan.
The deal between Kohinoor and BoB is not a sale and lease back of property . Thus, it would not be classified as NPA. At the same time, bankers say that since the agreement has a buyback clause, it is not a `true sale’.
Kohinoor CTNL Infrastructure Company had availed of little less than Rs.900-crore loan from a consortium led by SBI. While most banks sold their loans to Edelweiss ARC, three lenders-BoB, BoI and UCO Banks -did not. Banking sources said that Edelweiss ARC has agreed to arrange Rs.500 crore loan that the company needs to complete the project, provided they get first charge over the asset.
“Edelweiss ARC has agreed to give additional loan to Kohinoor Mills after it gets the `first charge’ of the property, ” said a senior official who did not want to be named.
Credits ET Realty