Sick firms cry foul as FIs clear Flex revival package

Saibal Roy Choudhury

New Delhi, Apr 11: Flex Industries Ltd (FIL) and Flex Chemicals Ltd (FCL) both of which are not sick companies have secured concessions from the three FIs -- Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India (ICICI) and Industrial Finance Corporation of India (IFCI) -- which go beyond the Reserve Bank of India's norms for providing relief to sick companies.

Companies with the Board for Industrial and Financial Reconstruction (BIFR) are planning to seek judicial intervention to force FIs to extend a similar package. A number of BIFR companies have been unable to get a revival package because of their inability to bring in additional promoter funds as directed by BIFR and FIs. Financial institutions have routinely refused to implement revival packages where promoters have been unable to bring their contribution. BIFR is planning to write to the FIs seeking details of the concessions extended to the Flex companies.

The relief package for FIL and FCLinvolves:

Waiver of compound interest and liquidated damages;

Overdue interest of Rs 140 crore not paid by the group is being converted into zero rated debentures to be paid between 2005 to 2012 in a ballooning fashion with bulk of payments to be paid in 2012;

Interest on long-term to be charged at 3.25 per cent in the first year (1999) and 5.75 per cent (2000) to be stepped up gradually to 18 per cent from 2005;

No promoters contribution and additional funding of Rs 60 crore to pay pressing creditors; also loans to be rescheduled and to be paid in 12 years.

IDBI, ICICI and IFCI have a combined exposure of over Rs 650 crore to the Flex group. FIL and FCL has not been able to service interest and payment of term loans on account of poor profitability. Both the companies had approached the institutions for restructuring of debt and sanction of additional long-term finance. They had also pleaded with the institutions to waive the 30 per cent promoters contribution requirement aslaid down in the RBI guidelines.

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