InvestorQ : Why has the Bombay High Court not agreed to stay the merger of LVB and DBS Bank, although shareholders objected to the equity write off?
Lavanya Subramanian made post

Why has the Bombay High Court not agreed to stay the merger of LVB and DBS Bank, although shareholders objected to the equity write off?

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Anamika Sodhani answered.
9 months ago
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The Bombay High Court on Thursday refused to stay the amalgamation between DBS bank and LVB on the grounds of full equity write-off. A group of promoter entities had initiated legal action against RBI and DBS Bank as the entire equity will be wiped out post merger.

The High Court has told the parties to file affidavits in the court and that the arguments would be heard on 14 December of both the parties. RBI had suggested writing off the equity of LVB totally as provided by Section 45 of the Act, which allows in special cases.

RBI has consistently maintained that LVB had negative net worth and despite all the revival efforts that it had put in any recovery chances had failed. The merger was, therefore, in larger public interest and the interest of the depositors and the integrity of the financial system.

As per the scheme of amalgamation, entire equity capital of LVB will be written off and so shareholders will get nothing. In addition, Tier-2 bonds worth Rs.320 crore out of the total outstanding Tier-2 bonds worth Rs.370 crore will also be written down. LVB does not have any AT-1 bonds in its books.

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