Tata Faces a Snag in its Attempt to Acquire Coffee Day’s Vending Business
By: Ashwathy Nair
The lenders to the (CGDL) Coffee Day Global Ltd are Yes Bank and Rabobank. Repayment of the entire due is being demanded to grant a (NOC) no-objection certificate to the proposed deal. CDGL is a unit of publicly traded Coffee Day Enterprises Ltd that runs the CCD (Café Coffee Day) outlets.
“A NOC from 14 lenders of CDGL is required for the deal. Except for two lenders, most of them have in-principle agreed to grant NOC. The Yes Bank and Rabobank are two of the largest lenders, and the coffee vending business along with a few other CDGL assets were held in trust with them for a loan with at least ₹300 crores.”
Tata Consumer Products Ltd, which owns the brands like Tetley Tea and Tata Salt, has proposed the acquisition of CGDL’s coffee vending business for at least ₹1,000 crores. A Tata Consumer spokesperson refused to respond on the developments but then he stated that “on an ongoing basis, the company assesses different opportunities.”
A spokesperson from Yes Bank refused to comment.
A Rabobank’s spokesperson from Utrecht, Netherlands stated that “We respect the confidentiality on which the client of Rabobank is relying on and generally doesn’t prefer to comment on an existing or non-existent business relationship with specific companies and do not elaborate or clarify the proceedings or possible deals that are related to individual clients.”
The dues that are to be repaid to Yes Bank by CDGL are worth around ₹100 crores and the dues to be repaid to Rabobank is ₹200 crore. The largest Indian lender to CDGL is Karnataka Bank with a loan of ₹175 crores.
“The loan from YES Bank was a conventional term loan and the loan from Rabobank was in the form of an ECB loan (external commercial borrowing). But because these lenders are having the coffee vending business itself as collateral, for this deal they are able to dictate more than the other 12 lenders on NOC.”
“As part of the proposal that was submitted by Tata to Coffee Day, the Tata Group has approved to firstly inject ₹600 crores into CDGL and then, pay ₹400 crores or more after a few months. The second portion of the investment will come after Tata evaluates the degree of recovery in cash flow in CDGL’s coffee vending business after the acquisition.”
The proposal that is submitted to CDGL’s lenders includes an equal amount of repayment to each of the 14 lenders from the proceeds of the investment proposed by Tata Consumer, irrespective of the size of the loan. “YES Bank and Rabobank are unwilling to accept this plan and have asked for more than other lenders or a complete repayment of their loans.”
“The lenders have to understand the fact that if the deal i.e. to sell the coffee vending business, gets delayed or doesn’t go through further, they might face a larger or a complete loan loss. If a company like Tata is buying out the business, the revival chances are much higher that will help the lenders to recover loans”.
