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Lenders of beleaguered Deccan Chronicle Holdings (DCH) failed to admit the debt restructuring referral in the Corporate Debt Restructuring cell. The lead lender ICICI Bank along with Axis Bank withdrew from drawing a recast scheme, in a meeting held among CDR member banks on Friday.
Lenders of beleaguered Deccan Chronicle Holdings (DCH), the publisher of three English newspapers and one vernacular daily failed to admit the debt restructuring referral in the Corporate Debt Restructuring (CDR) cell. The lead lender ICICI Bank with a credit exposure of around Rs 500 crore, withdrew itself from drawing a recast scheme, in a meeting held among CDR member banks on Friday, a banker who participated in the discussion told moneycontrol.com on condition of anonymity. Axis Bank (at around Rs 400 crore) too refused to be a part of the proposed debt recast.
The CDR cell, under the regulatory framework of the Reserve Bank of India (RBI), is a joint forum, which caters to an official platform for both the lenders and borrowers to amicably evolve policies for loan restructuring. Restructuring is a process when a borrower is unable to make timely repayments and approaches the lender to dilute the original terms under which the loan was sanctioned. This could include lowering of interest rates, or extension of tenure.
A consortium of around 13 lenders jointly loaned Rs 4,100 crore to the Hyderabad based Deccan Chronicle. According to norms, a bank having 20% or more exposure to working capital can refer the loan case to CDR cell. Moreover, a loan account can also be referred to the CDR cell when at least 75% of the banks (by value) and 60% of creditors (by number) agree to resolve the case under CDR system.
However, it requires the consent of at least three-fourth of the lenders to draw a debt recast scheme for a particular company for admitting the case into CDR cell. Above all, the lead lender has to approve the admission of the referred case.
"With the lead lender withdrawing from the case, Deccan Chronicle restructuring is out of the purview of CDR cell. Now, it has to be resolved bilaterally. Generally, banks with higher credit exposure try to avoid the CDR route. It is because, those banks will incur losses due to repayment moratorium, moderation of interest rates and so on," the source said.
Earlier, banks postponed the decision of admitting the cash-strapped DCH case into CDR cell due to lack of unanimity. Some other lenders include IDBI Bank , Canara Bank , and Andhra Bank . Canara Bank was asked to prepare an audit report about the company's poor financials.
"If it is proved that the company has defaulted due to financial irregularities, ICICI Bank and Axis Bank are justified in withdrawing itself. CDR door should be closed to those companies which are suffering due to their mismanagement," said an advisor who deals with debt restructuring cases.
ICICI Bank stock price
On March 10, 2014, ICICI Bank closed at Rs 1193.80, down Rs 7.5, or 0.62 percent. The 52-week high of the share was Rs 1236.90 and the 52-week low was Rs 758.80.
The company's trailing 12-month (TTM) EPS was at Rs 81.94 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 14.57. The latest book value of the company is Rs 577.59 per share. At current value, the price-to-book value of the company is 2.07.
READ MORE ON Deccan Chronicle Holdings , DCH, Corporate Debt Restructuring , CDR, ICICI Bank , Axis Bank , CDR cell, debt restructuring , Saikat Das
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