Zee Entertainment shares were down close to 9.5% after the country’s bankruptcy court aka the NCLT admitted an insolvency plea filed by IndusInd Bank against the company.
What Happened? The Mumbai bench of the National Company Law Tribunal (NCLT) initiated insolvency proceedings against Zee Entertainment Enterprises Ltd after its creditor IndusInd Bank filed a petition.
IndusInd Bank Ltd. filed the petition after the company failed to fulfil its obligation under a ‘Debt Service Reserve Account Agreement’ between the bank and Essel Group’s Siti Networks Ltd.
Zee was a party to the agreement as it was a guarantor of a loan worth ₹150 crore given by IndusInd Bank to Siti Networks.
IndusInd Bank in its petition claims a default of ₹83.08 crore against Siti Network, with Zee held liable as a guarantor.
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Zee Entertainment had earlier questioned the maintainability of the IndusInd Bank petition, saying the default occurred in October 2020, when the insolvency code was suspended. According to Zee, there cannot be a default unless the bank explicitly invokes the guarantee, which was not done until 2020.
The tribunal, however, admitted the bank’s petition, dismissing Zee’s plea against the petition.
The court has also admitted IndusInd's insolvency petition against Siti Networks, appointing Rohit Mehra as the interim resolution professional.
The development could deal a big blow to the proposed merger between Zee and Sony Pictures Networks India which was announced back in 2021.
Price Action: Zee Entertainment Ltd. shares were trading 9.42% lower at ₹186.55, soon after markets opened for trading on Thursday.
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