GAIL: Debt restructuring of Konkan ING Limited

Deals & Matters
28 February 2021

State-run energy firms NTPC and GAIL swapped their respective shares in Ratnagiri Gas and Power (RGPPL) and, effectively increasing GAIL’s shareholding in KLL to 84% while NTPC’s ownership in the 1,967 mega-watt (MW) gas-based power plant rose to 86.5%. The Firm represented GAIL in a complex transaction which first saw the restructuring of the debt in excess of USD 547 million of Konkan LNG Limited (KLL) and pursuant thereto, the acquisition of controlling interest in KLL by way of a swap of shares with NTPC.
In terms of the debt resolution plan GAIL infused Rs 2,700 crore in KLL in FY20, which was used to settle the latter’s loan of Rs 3,813 crore with 8 banks and financial institutions. This resulted in the increase of GAIL’s equity shareholding in KLL from 40.92% to 69.06%.

The Firm assisted GAIL in its negotiations with the banks, financial institutions on one hand and NTPC on another. In this respect, the Firm prepared the Framework Agreement for the transaction, the Debt Settlement Agreement, the Share Purchase Agreement and related documents including corporate authorisations. The Firm also advised GAIL on its ability to undertake and settle debt in a entity where there are a shareholder but not the parent.

The transaction involved discussions with a number of banks and financial institutions and had to be concluded within the financial year, which gave us a little less than a month in which to not only obtain the corporate approval of GAIL but ensure that all banks agreed to the terms of the settlement. In addition to the above, the Firm assisted GAIL in discussions with the other shareholders of KLL, such as NTPC. It was once the terms were agreed to that we started drafting the transaction documents.

The transaction was reported extensively in the media: