Interim funds for keeping the operations of stressed assets going has been a challenge for resolution professionals, who are in charge of the accounts.
Lenders are in talks with corporates keen on acquiring the stressed accounts, for providing working capital loans, and even term loans for expansion projects, bankers with direct knowledge of the development said. Most of the corporates that the banks are in discussion with, have expressed interest in bidding for assets that have been referred to the National Company Law Tribunal (NCLT) for resolution. Some of the assets are also from the second list of corporate defaulters that the Reserve Bank of India (RBI) sent to the banks in August. “The corporates have approached us with requests for working capital loans and even term loans. We are evaluating the proposals and will be open to lending to them if our risk assessment criteria permits. We are in advanced talks with them,” a senior banker with a large public sector bank said on condition of anonymity. The banker said some of the corporates have asked for term loans to fund expansion projects that might be necessary to make the acquired assets financially viable. “It could include setting up of power or raw material linkages that is critical to functioning of the assets,” he added. “They would immediately need the funds after the acquisition is done. That is why they want to make the arrangements well in advance,” another banker with a state-run lender said. What is also interesting is that in several cases, the existing lenders (who have greater knowledge of the assets) are looking at financing prospective buyers. Such loans will help the banks expand their loan books, which have been growing at a sluggish pace.
Interim funds for keeping the operations of stressed assets going has been a challenge for resolution professionals, who are in charge of the accounts. While most banks have stayed away from providing interim finance, because of lack of clarity on recovery of the funds, asset reconstruction companies have stepped in to bridge the gap, albeit at a higher rate of interest. Some of the accounts from the RBI’s first list of stressed assets have received multiple expressions of interest from domestic as well as international companies such as JSW Steel, Tata Steel, Arcelor Mittal, Posco, the Piramal Group, Vedanta and Bharat Forge, among others. The 11 accounts that are undergoing insolvency proceedings at the NCLT are Jyoti Structures, Essar Steel, Monnet Ispat and Energy, Alok Industries, Electrosteel Steels, Amtek Auto, Bhushan Steel, Bhushan Power and Steel, ABG Shipyard, Lanco Infratech and Jaypee Infratech. Bankers said the steel accounts are likely to be resolved first. The corporates could either bid alone or tie-up with private equity and stressed assets funds such as Oaktree Capital Management, AION Capital, Blackstone and others. Bankers said most of them are likely to place their bids by end-January. A majority of 28 the assets mentioned in the RBI’s second list are likely to be referred to the NCLT by the end of December. Bankers had time till December 13 to finalise a resolution plan for these with the promoters. A handful of companies including Videocon Industries, Jaiprakash Associates and Jayaswal Neco might not have to be referred to the bankruptcy court.