YES Bank asks court to restrain Zee stake sale
According to the YES Bank petition, Zee group company Living Entertainment Ltd (LEL) had borrowed $50 million from YES Bank in 2016 to buy shares in its own unit Veria International. Goenka had provided guarantees for the loan
Almost a year after promoters of debt-ridden Zee Entertainment Enterprises Ltd (ZEEL) sold 11% stake in the company, YES Bank Ltd has moved the Mumbai High Court, asking it to prevent them from selling any more stake, and stop Zee promoter Punit Goenka from leaving India. Essel group, which includes ZEEL, owes as much as Rs 8000 crore to YES Bank, which itself is in the middle of a complicated rescue.
According to the YES Bank petition, Zee group company Living Entertainment Ltd (LEL) had borrowed $50 million from YES Bank in 2016 to buy shares in its own unit Veria International. Goenka had provided guarantees for the loan. Separately, LEL entered into a put option agreement with another group company called ATL Media. Both are based in Mauritius. While LEL procures and supplies health and wellness content, ATL operates 35 TV channels outside India in 170 countries.
Under the put option, if the promoter stake in Zee fell below 30%, ATL must buy up to a 64.38% stake that LEL holds in Veria International, and also repay the loan. After this agreement was made, LEL assigned all its rights, titles and interest under the put option in favour of the trustee on behalf of YES Bank as additional guarantee for the $50 million loan, along with Goenka’s guarantee.
According to YES Bank, after the promoters sold an 11% stake in ZEEL to Invesco Oppenheimer Developing Markets Fund on 31 July 2019, their stake in ZEE fell below 30%, breaching the LEL-YES Bank loan agreement. However, when Yes Bank invoked the put option, ATL declined to purchase the committed 64.38% stake in Veria and transfer $52.5 million to repay the loan.
Additionally, YES Bank also sought an injunction restraining Goenka from leaving the country. It claimed Zee is attempting to transfer its assets and properties out of India by declaring dividends and making undue payments to its officers. The bank also fears promoters may shift focus to offshore businesses.