CG Power enters into inter-creditor pact, calls off merger with subsidiary

Nearly three months after CG Power and Industrial Solutions (CG Power) first informed the exchanges about a financial fraud, the company has entered into an inter-creditor agreement with some of its lenders, called off a merger of a wholly-owned subsidiary, and initiated a recovery process.
In a meeting that started on Sunday and extended to the early hours of Tuesday, the board of directors of CG Power approved the withdrawal of a scheme for the amalgamation of CG Power Solutions (CGPSOL), a wholly-owned subsidiary. 

“The board of directors of the company has resolved to call off the proposed merger, given various issues arising from the discovery of irregular transactions and other findings expected from the investigation,” the company said. It also noted an inter-creditor agreement has been signed with nine of its 14 lenders, “constituting 87.68 per cent of total outstanding credit facilities of the company”. CG Power is currently in active discussions with its lenders concerning the corrective action plan. CG Power also informed that it expects to submit the unaudited results for the first and the second quarters of this financial year shortly.

In a financial update statement, CG Power said it has issued recovery notices to seven entities demanding repayment Rs 1,314.78 crore owed by them. “Three notices sent by the company for the recovery amount of Rs 452.12 crore have been returned undelivered,” the statement noted. 

One of the seven notices sent was also returned with a counter-claim of Rs 525.21 crore with interest at 15.70 per cent per annum, the company said. Besides, the firm has initiated the process for recovering dues from promoter company Avantha Holding and Acton Global (AGPL) by sending it a recovery notice. Part of the statement, CG Power said the company generated earnings before interest, depreciation and taxes, including other income, of Rs 201.97 crore for the six months ended September 30.

The company further said that on November 8 it invoked a power of attorney (POA), which was issued in an unauthorised manner in favour of Blue Garden Estates (BGEPL) concerning the property at Nashik in the event of default of the conditions of assignment by the company.

Confirming a summon from the enforcement directorate (ED), it said a summon dated August 21, 2019, addressed to the director of CG Power Solutions, was received in connection with a proceeding before it relating to an unknown entity seeking certain information from CGPSOL.

 “Thereafter, a summon dated October 17, 2019, addressed to the whole-time director of CG Power was received.”

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