The financial crisis is seeing a spate of companies in India approaching the corporate debt restructuring cell (CDR) made up of a consortium of banks under the guidance of RBI. The number of companies approaching the cell has gone up from 10 in 2007-08 to 33 in 2008-09, with the total debt for restructuring rising from Rs 3,050 crore in 2007-08 to Rs 7,500 crore in 2008-09. Most of the companies that have approached the cell are in real estate, retail, auto ancillary and textile space. The latest to approach the cell will be Mumbai-based pharma major Wockhardt which is facing problems servicing its debts, which according to Crisil, are Rs 3,777 as of December 31, 2008.

The CDR cell?s restructuring involves increasing repayment period and lowering interest rates and is carried out by a group of 57 banks. Since its inception, the cell has received 208 cases with an aggregated debt of Rs 90,888 crore. Till December 31, 2008, the cell had approved restructuring packages for 173 companies with an aggregate debt of Rs 84,510 crore. It has rejected 29 cases with an aggregate debt of Rs 5, 018 crore and around six cases are under finalisation of restructuring.

The restructuring of debt by the CDR involves rescheduling of the principal, provision of working capital loans and also conversion of debt or unsecured loans into equity. Debt restructuring can only be referred to the cell provided the loan to the company has been lent by a consortium of banks and one of the banks in the consortium is selected as the lead institution to monitor the revival package. The main objective of the cell is to do a quick and transparent restructuring of a company that is outside the purview of the Industrial and Financial Restructuring and the Debt Recovery Tribunal.

The cell can take a minimum of 45 days to maximum of three months for recommending the restructuring of the debt proposal. For effective monitoring of the progress of implementation of restructuring schemes, the cell appoints a monitoring committee that comprises of a term lender, working capital bank and a minority lender and they report to the CDR cell on a monthly basis.

saikat.neogi@expressindia.com