Zee Entertainment Enterprises Ltd has resolved a major obstacle to its proposed merger with Sony Pictures Networks India by reaching a settlement with IndusInd Bank in an insolvency case.
The media company has made a partial payment of dues to IndusInd Bank as part of the settlement agreement, with the remainder of the dues to be paid before June 30. There were no details on the quantum of the initial payment.
IndusInd Bank had filed an insolvency application against Zee Entertainment, alleging that another Essel group subsidiary Siti Networks, for which the media company was a guarantor, had defaulted in payments of dues worth Rs 83 crore.
With the dispute resolved, IndusInd Bank has withdrawn its objections to the merger, and shares of Zee Entertainment rose over 5 per cent in intra-day trades before settling 3.5 per cent higher at ₹216.05 on the NSE.
Earlier in March, the National Company Law Appellate Tribunal (NCLAT) had stayed an order allowing the commencement of insolvency proceedings against Zee Entertainment, leading to concerns that the merger could be further delayed and causing the company’s stock to decline. The next hearing at the appellate tribunal is on July 3.
Guarantor Important Points
A guarantor is someone who agrees to be responsible for someone else’s payment of debt if the latter makes a default on payments of loan. Being a guarantor is not a mere formality to help the borrower, the guarantor is equally responsible for paying off the loan. Commonly, the terms of a co-borrower and loan guarantor are used interchangeably, however, this is a misconception. A loan guarantor comes into the scene only when both the borrower and co-borrower are unable to repay the loan and the bank considers that recovery is impossible due to some circumstances. In case of disability or demise of the main borrower, banks have the right to approach the guarantor to repay the outstanding loan amount.