Cash-strapped IL&FS is in advanced talks with Italy's major road operator Atlantia to sell a portfolio of toll-road assets for about $1.2 billion to deal with its existing liquidity crisis, The Economic Times reported.
IL&FS may sell some assets from the 28 build-operate-transfer (BOT) projects that are undertaken by its subsidiary IL&FS Transportation Networks (ITNL).
Under the proposed deal, Atlantia would assume part of the debt as well as pay the equity consideration. If the deal is sealed, it would wipe out Rs 25,000 crore of debt from ITNL's books, sources told the paper, adding that negotiations between the two firms are in final stages.
Read: Cash-strapped IL&FS may receive Rs 700 crore from NHAI soon: Report
The deal will also help the financial company improve its leverage as IL&FS has already defaulted on interest payments on its commercial papers thrice in a span of one month.
The company's credit rating has been downgraded from AAA to a defaulting status after it failed to repay a Rs 1,000 crore short term loan from Small Industries Development Bank of India (SIDBI). Read: SIDBI may file a case against IL&FS for defaulting on its term repayment
As on March 31, IL&FS' total outstanding debt stood at Rs 91,091.31 crore at the group level, with most operating assets owned by its subsidiaries. Around Rs 5,756 crore worth of debt is due for repayment in the next one year.
Atlantia has been looking to enter the Indian markets. In 2010, it partnered with Tata Realty and Infrastructure as a technical contributor and made a commitment of $300 million to acquire projects. In January, the company was said to be in talks with IRB Infrastructure to buy key road assets, but the deal was dropped due to differences over valuations.
Read: RBI had warned of IL&FS Financial Services' negative net-owned funds 3 years ago: Report
The Italy-based firm may see this as an opportunity to buy profitable assets from a struggling company, sources told the paper.
IL&FS board is set to meet on September 29 to chalk out a roadmap for the company to emerge from its liquidity crisis. The firm's lenders and shareholders may consider rescuing IL&FS to avoid a contagion effect on the entire financial system in India.
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