Zee Standstill Agreement
Six MFs — Aditya Birla Sun Life, ICICI Prudential, SBI, Franklin Templeton, HDFC Mutual Fund and Kotak Mutual Fund — had signed a status quo agreement with the Essel Group. At the time, the group claimed that the agreement covered more than 90% of the loans promised to its shares. However, out of a total of 7,500 loans to these lenders, the group repaid only 3,356 kronor. In other words, more than half of the amount was not paid in accordance with the agreement. In January, real estate funds entered into endless agreements with EEZ developers to prevent the sale of the company`s mortgaged shares, following a delay in repayment of some Essel Group companies. The liquidation of EEZ shares of approximately 200 securities by investment funds resulted in a decline of more than 30 per cent in a single day. Reports also indicate that FMs are divided on the extension of the deadline, as it is not clear how the Securities Exchange Board of India (SEBI) would respond to this issue. Previously, SEBI had expressed doubts about such status quo agreements and requested a response from participating IFs. However, experts say the regulator must intervene in the event of disagreement between lenders. Ashvin Parekh, Managing Partner, Ashvin Parekh Advisory, told ETNOW that if the MFs among them do not agree, “the regulator may have to intervene to solve this problem, because then it takes on another dimension as a whole.” Meanwhile, Anil Ambani Reliance Mutual Fund sold shares in Zee, raising 410 kronor that Essel`s developers had promised with the fund`s house to raise funds. Although Reliance is not part of this agreement, it is ironic that anil Ambani`s ADAG group has also entered into a similar status quo agreement with respect to mortgaged shares. While open investment fund systems generally have flexible repayment periods, closed systems have strict deadlines for closing funds related to the maturities of non-transferable companies or other obligations in which the system has invested.
When a CMA accepts a status quo agreement – primarily to facilitate a borrower who is unable to repay debts on the due date – it essentially alters investors by not handling the promised FMP maturity date. As a result, a moratorium was granted to the group until 30 September and the lenders` consortium agreed not to release the mortgaged shares until 30 September. The Essel Group also said in a statement that more than 90% of the lenders they financed against mortgaged shares are part of the agreement. Zee Entertainment had reached a status quo agreement with its lenders to extend the repayment period until September 30. Zee has already returned about half of the 11,000 euros to lenders, but is expected to miss the new repayment deadline.