The crippled Infrastructure Leasing & Financial Services (IL&FS) just can't seem to catch a break. The recently downgraded company needs an immediate capital infusion but lenders, who are owed over 62% of its Rs 91,000 crore debt, are reportedly demanding a comprehensive revival plan before loosening their purse strings further.
Citing senior bank officials, The Economic Times reported that lenders have declined to provide additional loans of Rs 3,500 crore to the term-lending institution unless a resolution plan explaining how debt will be repaid is put in place. IL&FS, under threat if its proposed rights issue fails, had sought this one-year loan to meet its payment obligations.
"Any additional funding - be it a rights issue or additional line of credit - will depend on the resolution plan," Rajnish Kumar, Chairman of State Bank of India, told the daily. "The resolution plan will have to be comprehensive, which we expect should include plan of repayment of dues in an orderly manner and change of management."
IL&FS will reportedly need Rs 300-500 crore every month to meet its payment obligations, unless it sells off some assets quickly to generate cash.
This development comes as shareholders of the Mumbai-based company voted in favour of raising Rs 15,000 crore through bonds at the recent annual general meeting. Meanwhile, since it defaulted on payments to bondholders and bankers, debenture trustees Centbank Financial Services opposed IL&FS declaring any dividend to shareholders.
The daily added that on Saturday, the company with over 100 step-down subsidiaries involved in financing, road, port, power and engineering had informed regulators that it was unable to pay interest and principal of Rs 47.7 crore due to banks on that day. In the past few days, the group has also defaulted on commercial papers and bonds.
"Lending to the step-down subsidiaries is also ruled out since the parent company is rated below investment grade. Secondly, the demand for loan is to repay other borrowing which by itself is not a viable model," said a senior official at another lender to IL&FS.
On Saturday, the company announced that it has decided to appoint Alvarez & Marshal to hash out a turnaround strategy. "We will develop a comprehensive plan for restructuring so as to be able to demonstrate to the creditors and the shareholders that the intrinsic value of the group is sufficient in repaying its liabilities. We have decided to appoint a specialist agency, Alvarez & Marsal, to take this plan forward," vice-chairman and managing director Hari Sankaran had said in a video released to the media after the board meeting.
The fate of the company's proposal to raise Rs 4,500 crore by end-October by way of a rights issue is also unclear at the moment. So far, only Life Insurance Corporation (LIC), its largest shareholder with a 25.3% stake and Japan's Orix Corporation (23.5% stake) have shown interest in subscribing to the rights issue. RBI deputy governors NS Vishwanathan and MK Jain recently met representatives of these two stakeholders and reportedly asked them to ensure the systematically important NBFC does not go belly up.
However, Abu Dhabi Investment Authority, which holds a 12.5% stake, and HDFC, Central Bank of India and SBI, which collectively own 23% of the company, have not yet committed to subscribing.
The company also plans to sell its assets to pare down its debt. The group has lined up a plan to divest as many as 24 projects to raise around Rs 30,000 crore.
With PTI inputs