Coffee Day Enterprises Ltd (CDEL) has negotiated a ₹205-crore settlement with Ares SSG Capital Management to be paid over three years , after the National Company Law Appellate Tribunal (NCLAT) set aside bankruptcy proceedings against the operator of coffee chain Cafe Coffee Day on 27 February.
A part of this settlement hinges on the coffee chain achieving certain parameters linked to higher earnings before interest, taxes, depreciation and amortization (Ebitda) over the next three years, two people familiar with the development said.
CDEL told the exchanges on Monday that the company’s board had approved a settlement of ₹205 crore with IDBI Trusteeship.
Breakdown of the settlement
IDBI managed two of Ares SSG Capital Management’s funds – India Opportunities Fund and India Special Situations Fund. This settlement of ₹205 crore includes the amount “realized on sale of 12.41% of the pledged and invoked shares of Coffee Day Global Limited owned by the Company, by the lender to a third party for ₹55 crore,” the company told the exchanges on Monday.
While the board of CDEL has approved this settlement in principle, the company is expected to sign an agreement with Ares Managment later this week.
“An initial payment of ₹80 crore is to be paid on signing the agreement, which includes ₹55 crore from the sale of the pledged and invoked shares by the lender. A sum of ₹75 crore will be paid within one year of the settlement. The last tranche will be paid on achieving certain parameters,” the first of the two persons cited earlier said, both of whom spoke on the condition of anonymity.
The second person said that the last tranche of ₹50 crore hinges on Coffee Day Global achieving higher Ebitda milestones, and CDEL crossing a certain upper threshold in share price over the next three years. Stock of Coffee Day Enterprises Ltd rose by its daily maximum of 5%, closing at ₹24.54 apiece on the BSE after news broke of the settlement.
If the group does not meet the two parameters, the last tranche falls off, and it would have paid Ares SSG only ₹155 crore in all.
Ares Management did not immediately respond to a request for comment on Tuesday.
Path to recovery
The agreement brings to an end insolvency proceedings against Coffee Day Enterprises, which IDBI Trusteeship had initiated after the company defaulted on a ₹228 crore loan.
In March 2019, IDBI Trusteeship, which managed the two Ares SSG Capital Management Funds, subscribed to 1,000 non-convertible debentures through a private placement, investing ₹100 crore. At the time, the firm was called SSG Capital Management. It was taken over by Ares Management in 2022 and its Asian division thereafter assumed the name Ares SSG Capital Management.
CDEL defaulted on coupon payments due between September 2019 and June 2020. On 28 July 2020, IDBI Trusteeship issued a default notice to CDEL and later filed an insolvency application, which resulted in the NCLT admitting the case in August 2024. This was challenged by CDEL in the NCLAT, which set aside the NCLT ruling last month. Thereafter, Ares and CDEL negotiated in private to arrive at the settlement.
With the settlement of this loan, the group would be left with a total debt of ₹1,068 crore. “The bulk of this debt – over ₹800 crore – is expected to be restructured by CDGL in negotiation with several asset reconstruction companies,” the second person said.
One of India’s first coffee chains, Coffee Day plunged into crisis after its founder V.G. Siddhartha died by suicide in July 2019, leaving behind a coffee enterprise with over ₹7,200 crore in debt. The company has since been paring its debt through sale of non-core assets and loan restructuring.