CCD Averts Bankruptcy through Debt Settlement

Coffee Day Enterprises is considering the commencement of negotiations for a settlement with IDBI Trusteeship.

The latter has initiated bankruptcy proceedings against the struggling coffee chain to recoup outstanding payments owed to bondholders.

In a regulatory disclosure submitted to the stock exchange on September 8, Coffee Day reported that IDBI Trusteeship had initiated legal action against the company to reclaim Rs 228 crore in dues.

Subsequently, on the following Monday, the company's stock experienced a significant decline of 14.6%, trading at Rs 45 per share, in response to the news of the bankruptcy proceedings.

The stock had witnessed a surge in recent months, primarily driven by the heightened efforts of Malavika Hegde, the widow of Coffee Day's founder, Siddhartha, to revive the company.

According to information from banking insiders, Ares SSG acquired Coffee Day bonds at a reduced price through its special situation fund.

The asset reconstruction firm commenced bankruptcy proceedings via IDBI Trusteeship due to non-receipt of payment.

Lenders anticipate that the company will likely propose a settlement, as they recall a previous instance in February when Phoenix ARC had initiated insolvency proceedings but withdrew them when the company engaged in settlement negotiations.

Coffee Day subsequently forged a restructuring agreement with Phoenix ARC on April 27. The National Company Law Tribunal (NCLT) granted permission for the withdrawal of the petition on June 19, with the provision that Phoenix ARC retains the option to submit a new company petition in accordance with the law if the restructuring agreement does not succeed.

In the preceding month, the National Company Law Appellate Tribunal halted a corporate insolvency case against Coffee Day Global, a subsidiary of Coffee Day Enterprises, which was pending in NCLT Bengaluru.

The company lodged an appeal against the bankruptcy proceedings initiated by financial creditors, citing that the claims were related to a period during which the government had declared a loan repayment moratorium in response to the pandemic.