Debt recasts: Not just small firms, big ones use them too

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New Delhi | Updated: Jun 13, 2015 8:22 AM

While Essar Steel has approached banks for a recast of loans worth close to Rs 12,000 crore, Essar Port has also sought a Rs 6,000 crore recast, bankers say.

reliance industriesWhile Essar Steel has approached banks for a recast of loans worth close to Rs 12,000 crore, Essar Port has also sought a Rs 6,000 crore recast, bankers say. (Reuters)

The option of recasting bank loans after getting into financial trouble isn’t something that is being exercised only by medium- and small-sized companies. Even the likes of Mukesh Ambani-promoted Reliance Gas Transportation Infrastructure Ltd (RGTIL) have managed to secure a long-term loan restructuring package extending up to fiscal 2030-31 from local banks.

Banks had also recast the Rs 7,500-crore loan of Pipavav Defence & Offshore Engineering, now controlled by the Anil Ambani group, in March this year. Jaypee Infratech, Adani Power and Uttam Galva Metallics also managed to obtain the approval of lenders to restructure their loans worth Rs 25,000 crore under the 5:25 scheme allowed by the Reserve Bank of India.

While Essar Steel has approached banks for a recast of loans worth close to Rs 12,000 crore, Essar Port has also sought a Rs 6,000 crore recast, bankers say. Last week, banks approved the restructuring of the Rs 35,000 crore loan of Bhushan Steel.

Debt recast plans of 285 companies — including HCC, Gammon and ABG Shipyard — for Rs 2,86,505 crore are currently being implemented, says the corporate debt restructuring (CDR) cell of banks.

Unlisted RGTIL, with a debt of Rs 16,010 crore at the end of March, 2015 (Rs 16,357 crore in the previous year), has quietly got the approval from lenders to change the repayment conditions. “The company has obtained sanctions from banks for rescheduling the principal repayment of the rupee term loans till 2030-31 as against the current repayment schedule over next four years,” RGTIL managing director RK Dhadda said in a statement to the National Stock Exchange.

“The continued decline in natural gas production in the KG-D6 block and consequent lower pipeline capacity utilisation of the company has resulted in the company incurring losses and erosion of net worth since FY12,” Dhadda said.

The RBI had complained that “restructuring is resorted to liberally in case of the industrial sector (particularly large industries — 9.3 per cent of advances), while smaller borrower accounts such as agriculture (1.45 per cent) and micro and small enterprises (0.94 per cent) see less of restructuring.” Gross NPAs of PSBs as on March 2015 stood at 5.17 per cent while the stressed assets ratio (which include NPAs and restructured loans) stood at 13.2 per cent (or over

Rs 7,12,000 crore), which is nearly 230 bps more than that for the system, according to figures released by the RBI. Many of the restructured loans —165 firms with a debt of Rs 56,995 crore — have not worked with nearly half of the failures coming in 2014-15.

Bankers were rescheduling stressed loans under the corporate debt restructuring (CDR) route till March 31, 2015. After it was shut from April 1, corporates are now lining up under the 5:25 flexible structuring scheme. Here, lenders are allowed to fix a longer amortisation period for loans to projects in infrastructure and core industries, for say 25 years, based on economic life or concession period of the project, with periodic refinancing in every 5 years.

Rating agency Crisil has cautioned that around Rs 80,000 crore of stressed loans which could be structured under the 5:25 scheme could mask the asset-quality pressures and NPAs to be reported by banks may not give a clear picture about their stress levels. “Infra companies have already queued up before lenders to restructure loans worth over Rs 50,000 crore under the 5:25 scheme. If you go through the scheme it’s very clear that it’s tailor-made for ever-greening of problem infra loan accounts. It’s surprising that the RBI has agreed for such a scheme,” said a banking source.

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