Lenders to Essar Projects will soon initiate a strategic debt restructuring (SDR) plan for the debt-ridden company, bankers told FE, adding that a decision to this effect had been taken at a joint lenders' forum (JLF) meeting held last week.
Lenders to Essar Projects will soon initiate a strategic debt restructuring (SDR) plan for the debt-ridden company, bankers told FE, adding that a decision to this effect had been taken at a joint lenders’ forum (JLF) meeting held last week.
Data sourced from the registrar of companies shows the company had a total debt of R5,025.3 crore as of March 2015. It incurred a net loss of R167.5 crore on revenues of R4,814.1 crore in 2014-15.
“We have decided to convert a part of Essar Projects’ debt into equity via the SDR scheme,” a senior banker with a public sector bank (PSB), who was present at the JLF meeting, said. While the exposure is currently classified as a “standard” asset across the consortium, bankers indicated the account was not “healthy”. Although banks have initiated SDRs for nearly two dozen companies, none has so far fructified.
An Essar spokesperson said in response to a query that the information was incorrect. “This is absolutely incorrect and we categorically & unequivocally deny your information,” a statement from the company said.
State-owned IDBI Bank is the lead banker of the consortium to the company, which is an engineering, procurement and construction firm. Essar Projects has been in business for over four decades and was the first Indian company to lay offshore pipelines for Oil and Natural Gas Corporation way back in 1982.
Earlier this month, Essar Steel had requested banks to convert R12,200 crore of its debt into equity — R9,000 crore into preference shares redeemable after 12-18 years and R3,200 crore into common equity. As part of the restructuring proposal, Essar Steel’s promoters had promised bringing in an additional equity of R1,500 crore.
In July, FE had reported banks were exploring the possibility of restructuring R31,000 crore worth of Essar Steel’s loans under the scheme for sustainable structuring of stressed assets (S4A). Last year, FE reported Essar Ports had asked its lenders to restructure its debt under the Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries, popularly known as the 5/25 scheme. The restructuring plan allows banks to extend the tenor of a loan to infrastructure projects, thereby reducing the repayment burden on companies
The Reserve Bank of India has been increasingly empowering banks to deal with stress through various schemes including SDR, which allows lenders to pick up a controlling stake in a firm by converting a part of the debt
The SDR was followed by the S4A, under which the debt is bifurcated into two parts and the unsustainable part is converted into redeemable cumulative optionally convertible preference shares. The sustainable portion must amount to at least half the total debt for the scheme to be initiated.