LegalPay, a Delhi based tech-focused start-up that invests in commercial litigations and provides interim finance, has closed a transaction of interim finance of an undisclosed amount to the Bengaluru and Ranchi based hospital – Yashomati Hospitals Private Limited – undergoing insolvency. The transaction was completed in a record time of less than three weeks.
Interim Finance is a short-term, super-secured lending for 6 to 12 months granted to the companies undergoing insolvency. The interim finance is analogous to providing oxygen or SOS to the corporate debtor and is used to pay operational costs of immediate needs such as payments to professionals, workers, security personnel, etc. The main objective of grant of interim finance is to keep the companies under insolvency running under the legal backing and safeguards provided by the Insolvency and Bankruptcy Code, 2016.
Ravindra Beleyur, appointed Resolution Professional for Yashomati Hospitals Private Limited, while sharing his experience of working with LegalPay states, “I and my Team thank the LegalPay Team for a very responsive approach. We never expected or/and thought that the Term Sheet could be finalized by any Interim Finance provider in less than 12 days from the initial email. This is the level of quick response needed for any Interim Finance for any CIRP. We complement the LegalPay team to keep this speed for all the time-bound CIRPs which is an absolute need.”
This segment is dominated by private equity and ARC giants such as Edelweiss, KKR, and Eight Capital, who high-ticket transactions. LegalPay targets mid-market companies including the MSMEs undergoing insolvencies in which the requirement of interim finance ranges from INR 10 lakhs to INR 5 crores.
Based on the reports and official data released by IBBI, the interim financing requirements for the companies undergoing insolvencies vary between the range of an amount as small as INR 10 lakh, to as hefty as INR 800 crore. Certain industry experts have opined the general interim finance requirement varies between INR 50 crores to INR 200 crores.
Kundan Shahi, Founder & CEO of LegalPay said, “ We feel pride in contributing for revival of a hospital, especially in the midst of a pandemic. We follow a very stringent due diligence and risk assessment process before arriving at a decision. The number of admitted CIRPs is set to grow specifically after the introduction of a pre-packed insolvency process, which is a much quicker 120 day process. We see insolvency market as a very strong foot-hold for us and look forward to provide best possible solutions to organise the market and make it efficient.”
Interim finance, including interests accrued, has been given superior priority status over debts due to all other creditors under IBC. It is a part of the corporate insolvency resolution cost and has priority over payment to other creditors if the resolution plan is approved or if the liquidation process is commenced. Many lenders are now finding interim financing as an investment opportunity as the interest rates on these loans is very market-competitive and lucrative. Even, several provisions under IBC ensure and secure the interests of creditors and investors.