Coffee Day Enterprises is poised to commence negotiations for a settlement with IDBI Trusteeship, who have initiated bankruptcy proceedings against the troubled beverage chain in an effort to recover outstanding debts on behalf of bondholders.
In a regulatory disclosure submitted to the stock exchange on September 8, Coffee Day revealed that IDBI Trusteeship had lodged a case against the company, seeking to recover INR 228 crore. Subsequently, on Monday, the company’s shares experienced a sharp decline of 14.6%, plummeting to INR 45 each in response to the news of the bankruptcy proceedings. This drop occurred after a recent surge in the company’s stock over the past few months, coinciding with increased efforts by Malavika Hegde, the widow of Coffee Day’s founder Siddhartha, to revitalize the company.
According to banking sources, Ares SSG acquired Coffee Day bonds at a reduced price through its specialized distressed asset fund. The asset reconstruction firm then triggered the bankruptcy proceedings through IDBI Trusteeship due to non-receipt of payments.
Lenders anticipate the company’s willingness to engage in a settlement, as in February, Phoenix ARC had initiated insolvency proceedings that were later withdrawn when the company cooperated for a resolution.
On April 27, Coffee Day subsequently engaged in a restructuring agreement with Phoenix ARC. The National Company Law Tribunal (NCLT) permitted the withdrawal of the petition on June 19, with the provision that Phoenix ARC could file a new company petition under the law if the restructuring agreement proved unsuccessful.
Earlier last month, the National Company Law Appellate Tribunal intervened by issuing a stay order on a corporate insolvency case filed in NCLT Bengaluru against Coffee Day Global, a subsidiary of Coffee Day Enterprises. This action came about as a response to the company’s appeal challenging the bankruptcy proceedings initiated by financial creditors. The crux of their argument was that the claims in question were related to a period when the government had declared a moratorium on loan repayments in light of the ongoing pandemic.
Read More: NCLAT halts Coffee Day Enterprises’ insolvency admission amid promoter’s default date challenge