Tarun Sharma Moneycontrol News
The Indian Banks’ Association (IBA) may again approach the Reserve Bank of India (RBI) to defer provisioning for Infrastructure Leasing & Financial Service (IL&FS) group companies. This time around, IBA may apply only for 'Amber' companies of IL&FS after a meeting with the Secretary of the Ministry of Corporate Affairs (MCA) and new Uday Kotak-led board on January 22.
Amber companies are those entities, which are unable to meet all their obligations (financial and operational), but can meet only operational payment obligation to senior secured financial creditors. Such entities are permitted to make payments necessary to maintain and preserve a going concern.
Referring to IBA’s representation to RBI seeking temporary dispensation of asset classification requirements in relation to banks’ exposure to IL&FS group companies, MCA Secretary Injeti Srinivas told the new board of IL&FS and lenders of IL&FS that the same needs to be taken up once again. However, he added the same should be made with a full justification that “the deferment of provisioning should be requested only for 'Amber' category companies, where banks are unable to enforce payments due to moratorium and the funds are available in the escrow account.”
Moneycontrol has a copy of the progress report and minutes of the January 22 meet.
IL&FS has total debt of Rs 89,393 crore as of date. Over 300 group entities are unable to service their debt. On October 1, 2018, the Mumbai bench of the National Company Law Tribunal (NCLT) sacked its old board and constituted a new board under the leadership of Uday Kotak. It also authorised the Serious Fraud Investigation Office (SFIO) to probe alleged financial regularities in the non-banking financial company (NBFC).
Rajnish Kumar, Chairman, State Bank of India, (attended the via video conference), proposed that the special purpose vehicle of IL&FS, with adequate cash flow to meet payment obligations to secured creditors, should be excluded from this moratorium.
Another concern was raised by PS Jayakumar, Managing Director, Bank of Baroda, relating to prioritisation of claims among secured and unsecured creditors. He sought no change in priority claims of secured creditors.
The progress report prepared by the new board of IL&FS, and filed by MCA with NCLT, mentioned the following challenges: 1) IL&FS has 301 group entities, of which 128 are located in offshore jurisdictions; 2) The remaining 174 companies are incorporated in the country, of which 71 companies have external debt; and 3) Since these companies are incorporated in an offshore destination, legal course of action will have to be pursued under the law of that land.
As per the report, the last date for receipt of expression of interest for IL&FS Securities Services and ISSL Securities & Trusteeship (ISTSL) was November 23, 2018 and 11 EoIs were shortlisted. For renewable energy, the last date for submission of EoI was December 10, 2018 and 22 EoIs met the cut. For its domestic assets (roads; stadium; engineering, procurement, and construction (EPC); operation and maintenance (O&M) businesses the last date was January 8 and 32 EoIs qualified. The last day for receipt of bids for its education and Alternative Investment Fund businesses was January 11 and 11 EoIs qualified in both segment.
The report added that discussions are underway on ONGC Tripura Power Company, Mangalore Special Economic Zone, IL&FS Paradip Refinery Water, UAE-based IL&FS Prime Terminals, IIPL USA and YuHe Expressway. Assets with an embedded debt of Rs 35,000 crore are being monetised and EoIs on an additional Rs 15,000 crore worth of assets are to be launched in the next 4-6 weeks, it stated.
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