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Big Haircut for Lenders as NCLT Okays Resolution Plan for Orchid Pharma

The Chennai bench of the National Company Law Tribunal (NCLT) has approved the resolution plan submitted by US-based investor Ingen Capital Group LLC for Chennai-based pharmaceutical manufacturer Orchid Pharma Ltd, following which the management will be constituted under the control of the new investor. Orchid’s lenders may take a haircut and would receive around ₹10 billion out of the total ₹32 billion outstanding, according to sources close to the development. The company today informed the exchanges that the resolution plan by Ingen Capital Group was approved by the NCLT on September 17 under the Insolvency and Bankruptcy Code, 2016. Ingen has to pay the amount in 30 days and settle the banks by that time. A consortium of 24 banks has lent a total of over ₹32 billion to the drug maker. Apart from this liability, there are amounts due from Orchid to its employees and other outstanding payments as well. “The Banks will have to take a haircut and may be able to recover ₹10 billion out of the total outstanding,” said a source on condition of anonymity. The Board of Directors will be formed after the amount is paid to the banks, to take over the management from the Resolution Professional. The Committee of Creditors (CoC) considered the resolution plan of Ingen Capital Group, an alternate asset manager with expertise in infrastructure, energy and healthcare, in its meeting on June 4. The plan received an affirmative vote of 78.64 percent of the CoC by value in its favor, said a company filing with the exchanges.

The NCLT had issued an order to appoint an IRP to take charge of the management of the pharmaceutical firm, with effect from August 17, 2017. The company said in a regulatory filing that the Order issued by the NCLT, Chennai Bench, admitted a petition filed by an operational creditor Lakshmi Vilas Bank. The company was among the 28 large corporate defaulters in RBI’s second list, and which were referred to the NCLT. The company had sold its generic injectables business to Hospira Healthcare, a US-based company that was later acquired by Pfizer, in 2009 for a consideration of USD 400 million (₹18.50 billion as per the then prevailing exchange rate). At the end of August 2012, the company announced the sale of its carbapenem and penicillin API manufacturing facility in Aurangabad along with the related R&D unit in Chennai and product pipeline to Hospira for a consideration of USD 200 million (around ₹11.50 billion then). Orchid is said to be the first export-oriented unit in the domestic pharmaceutical industry, post liberalization. The company had a strong presence in cephalosporin antibiotic APIs, oral finished dosage formulations, generic injectables, carbapenem and penicillin formulations, and non-penicillin and non-cephalosporin medicines. In 2008 there were reports of a takeover threat from Ranbaxy Group, through its arm Solrex Pharmaceuticals. – Business Standard

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