India: IL&FS Considers Plan To Recast Part Of Its Stressed Loans From Banks, MFs

Infrastructure Leasing and Financial Services Ltd (IL&FS) Tuesday said its board is considering a plan to recast some of its stressed loans from banks and mutual funds.

In an affidavit submitted to National Company Law Appellate Tribunal (NCLAT), IL&FS said its board is already considering a restructuring proposal from lenders for one of its special purpose vehicles (SPVs) in Uttar Pradesh. IL&FS also said it is willing to consider similar proposals for other troubled group firms to exit insolvency. The restructuring could involve seeking a reduction in interest rates and a modification of the terms of loans.

Lenders to Moradabad Bareilly Expressway Ltd (MBEL), an SPV building a state highway in Uttar Pradesh, have suggested releasing cash flows from the SPV’s bank accounts to the company’s financial and operational creditors. Since MBEL is classified as an ‘amber’ asset with regard to its solvency—that is, NCLAT has allowed MBEL to temporarily suspend payments to creditors— allowing MBEL to resume payments under new terms would give its lenders some relief.

The loan recast proposal was made by secured lenders India Infradebt Ltd, L&T Infrastructure Finance, L&T Finance, L&T Infrastructure Debt Fund, Bank of Baroda and Bank of India, the affidavit said. In return for releasing these cash flows, the lenders have proposed to reduce the interest rate and modify the terms of certain secured financial debt. If the proposal is approved by both IL&FS and the lenders, MBEL will be re-classified as a fully solvent “green” asset.

IL&FS had classified 55 entities as green, 13 as amber and 82 entities as red, in descending order of their solvency rates. The group has fund-based debt of ₹94,215 crore from external creditors, of which the ‘red’ entities account for ₹61,375.6 crore.

In the affidavit, IL&FS also provided an update on the sale process of various assets. Sale of the wind energy business to minority investor Orix Corp. is under way, and the Tripura government has offered to buy out IL&FS’s 26% stake in the ONGC Tripura Power Co. at 80% of face value. The power company has debt of ₹3,337 crore. Similarly, in other assets where IL&FS is part owner, the company is in talks to sell its shareholding to its joint partner, all of whom are governments or public sector companies. This includes the government of Gujarat for GIFT-City Co. (debt of ₹1,233 crore), Indian Oil for IL&FS Paradip Refinery Water Ltd ( ₹747 crore), and the government of Tamil Nadu for the Tamil Nadu Water Investment Co. and New Tirupur Area Development Corp. ( ₹579 crore).

ONGC has offered to buy out the Mangalore SEZ (debt of ₹551 crore) at a “substantial discount to face value”, IL&FS said. IL&FS Solar Power Ltd, with debt of ₹632 crore, has not received any bids under the sale process. A public Swiss Challenge process will be invited for IL&FS Technologies Ltd, with debt of ₹111 crore, and binding bids are expected by 11 July. The sale of IL&FS Securities Services and ISSL Settlement and Transaction Services has been held up due to investigations carried out by Sebi and the Economic Offences Wing. The bidding process for the asset of IL&FS Thermal, IL&FS Transportation Networks, IL&FS Investment Managers, IL&FS Education are underway.

In the affidavit, IL&FS also raised concerns with NCLAT about Allahabad Bank, which has refused to release certain “going concern” payments in respect of Road Infrastructure Development Co. of Rajasthan amounting to ₹52.51 lakh from October to February. This, despite the NCLAT directing secured lenders not to exercise any right of lien on IL&FS assets.

IL&FS has asked NCLAT to direct Allahabad Bank to release the payments.

IL&FS has requested that these banks invest the amounts lying in escrow and other accounts of the IL&FS group into fixed deposits so that the interest earned on this can be used to pay off creditors.

However, it said Punjab National Bank, Allahabad Bank, Oriental Bank of Commerce, Bank of India and Union Bank of India have refused to do this with regard to the following assets: Jharkhand Road Projects Implementation Co, East Hyderabad Expressway Ltd, Pune Sholapur Road Development Co and ITNL Road Infrastructure Development Co. IL&Fs has asked NCLAT to direct these banks to invest in fixed deposits and liquid funds as requested.

It has also classified certain high-profile projects, including Gujarat International Finance Tec-city Co (GIFT city), Mangalore SEZ, ONGC Tripura Power Company and New Tirupur Area Development Corporation as fully solvent “green entities” while Jharkhand Infrastructure Development Corporation Ltd and Orissa Project Development Co are insolvent “red” companies.

Late on Tuesday, IL&FS said in a statement that it has initiated a comprehensive claims management process for 70 group entities in order to “crystallise the financial and operational liabilities of IL&FS group to facilitate distribution of proceeds from the resolution process”. Grant Thornton India LLP has been appointed as the Claims Management Advisor for overseeing and executing the process. All financial and operational creditors to these 70 entities are invited to submit proof of their claims till 15 October 2018 to Grant Thornton.

This article was first published on livemint.com