IL&FS creditor repayments may spill over to next year as coronavirus slows insolvency and bankruptcy

The pandemic has led to binding bids for key assets being pulled, hindered the diligence and decision making process for potential buyers.

A keenly watched Indian shadow bank insolvency process has been delayed, highlighting how the virus pandemic is impeding the nation’s nascent bankruptcy regime. Payments to creditors from Infrastructure Leasing & Financial Services Ltd., whose default in September 2018 triggered a lingering credit crisis in India, are likely to spill over to the financial year beginning April 2021, management said in a call on Monday. It had previously aimed to resolve a bulk of those by this month.

The pandemic has led to binding bids for key assets being pulled, hindered the diligence and decision making process for potential buyers, and slowed the already complicated judicial process required for asset sales, according to the IL&FS management.

It’s another sign of how Covid-19 is obstructing an insolvency regime introduced in 2017 that was supposed to help India manage one of the world’s worst bad loan ratios. A long line of the nation’s companies are now mired in bankruptcy courts, including Jet Airways India Ltd. and power generator KSK Mahanadi Power Co., both of which have been forced into over half a dozen extensions of their sale process deadlines.