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Lenders to debt-ridden Videocon Industries are set to refer the company to the bankruptcy court because they are unsure about whether the company’s proposed debt recast program will meet the Reserve Bank of India’s conditions to deal with defaulters.
On a related note, the restructuring of Jaiprakash Associates’ account is expected to be completed before the December 31 deadline, three senior bank officials told The Economic Times on the condition of anonymity.
Videocon and JP Associates, who have debt of Rs 47,500 crore and Rs 26,000 crore on their books, respectively, were the top two in a list of 29 defaulters published by the Reserve Bank of India in August. The central bank had ordered lenders to find a resolution for these accounts before the end of the calendar year.
In its circular, the RBI had said that any debt recast program that did not come from the National Company Law Tribunal (NCLT) will only be valid if two rating agencies gave investment-grade rating to the sustainable portion of the company’s debt, which will remain on its books even as the unsustainable portion gets restructured.
"Videocon Industries has proposed a debt recast package to lenders which includes monetisation of assets such as land in metro cities and repayment of loan over 15 loans," one of the bank officials mentioned above told the newspaper.
Lenders have submitted their proposal to the central bank, which will in turn appoint two debt rating agencies to rate the company’s sustainable debt. Three officials from banks exposed to Videocon said that they were not very hopeful of the company’s sustainable debt getting an investment-grade rating because the proposed debt recast plan does not include a concrete plan for paying off the sustainable portion.
State Bank of India, which leads a consortium of lenders to the company, has asked for more time to restructure the loan but has nonetheless initiated dialogues with resolution professionals just to be safe, the above-mentioned officials said.
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