The Shapoorji Pallonji (SP) Group is reportedly asking state-run institutions for ₹20,000 crore in order to restructure debt that was taken out against holdings in the Tata Group holding firm. The Tata Trusts and Tata Sons are reportedly keeping a careful eye on this move. Tata Sons is owned by the Mistry family-backed SP Group to the tune of 18.37%, all of which is secured by loans. The holding firm is 66% owned by the Tata Trusts.
According to people with knowledge of the situation, the Tata Trusts and Tata Sons have been debating whether or not the organizations are aware that the Tata Sons Articles of Association, 57–61, control the transfer of shares in the case of a shareholder default. They stated that a share transfer cannot occur without board permission.
According to one of the reports, Indian lenders and their credit committees would have to assess if the risk of not being able to sell or transfer the security in the event of failure is acceptable.
"No Issue with Default"
In order to be able to enforce the security, they also need to consider the prospect of becoming involved in legal disputes with Tata Sons, the individual stated.
"This is relevant for locally regulated institutions, but it might not have been so for foreign unregulated entities," stated a second speaker. Given the flawed nature of the underlying security, a potential lender—being a regulated entity—would need to be certain that a loan of this kind complies with local laws."
According to the SP Group, there is no restriction on its Tata Sons shares, nor does the issue of default come up. It has been negotiating with lenders to refinance $2.2 billion, which was financed with a 3.5-year term in June 2021, at a rate above 18% from Ares SSG and US hedge fund Farallon Capital. The Mistry family, who has a 9.182% share in Tata Sons, is the debtor through Sterling Investment Corp. Pvt. Ltd. (SICPL). Cyrus Investments Pvt Ltd, a different entity, owns the remaining portion (CIPL).
One of the individuals stated, "Given the high cost of this loan, it is likely to be rolled over by both funds."
The individuals mentioned above stated that board permission is required for any transfer of Tata Sons shares under the AoA (Articles of Association). The Tata Trusts and Tata Sons remained silent. The financial firms PFC and REC, who are rumored to have been contacted by the SP Group, did not answer questions. The Supreme Court's decision has no restrictions on the SP Group's Tata Sons ownership, the company claimed.
