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  1. Banks clear additional Rs 120-cr priority loan to Alok Industries

Banks clear additional Rs 120-cr priority loan to Alok Industries

Lenders to Alok Industries, the highly-indebted textile manufacturer whose net worth has been eroded, have decided to provide the company with Rs 120 crore of additional 'priority' finance, senior bankers told FE.

By: | Mumbai | Updated: August 24, 2016 7:22 AM
Lenders to Alok Industries, the highly-indebted textile manufacturer whose net worth has been eroded, have decided to provide the company with Rs 120 crore of additional 'priority' finance, senior bankers told FE. Lenders to Alok Industries, the highly-indebted textile manufacturer whose net worth has been eroded, have decided to provide the company with Rs 120 crore of additional ‘priority’ finance, senior bankers told FE.

Lenders to Alok Industries, the highly-indebted textile manufacturer whose net worth has been eroded, have decided to provide the company with R120 crore of additional ‘priority’ finance, senior bankers told FE.

While a few members of the consortium of lenders have already approved the fresh loans, a few others are expected to do so in a day or two, the bankers said.

FE had earlier this month reported about Alok Industries’ request for additional funds on the basis of a big jump in capacity utilisation. Banks have already classified their exposure to Alok — more than R19,920 crore — as non-performing and had initiated a strategic debt restructuring (SDR) for the firm.

However, the Bombay High Court had in July stayed the sale of assets and a change in the company’s equity structure, keeping banks from converting any loans into equity. The court’s order followed a winding up petition filed by HSBC on behalf of a clutch of unsecured lenders, including VTB Capital, to settle outstanding dues worth $55 million.

The company reported consolidated loss of R3,774.2 crore in FY16 on revenues of R13,040.9 crore, down 46% over FY15.

“Some members of the consortium of lenders to Alok Industries have shown confidence in the turnaround efforts of the company and have approved additional funding, while others are in the process of doing so.

The fresh loans have a priority status, which means they will have to be repaid first,” a senior banker with a medium-sized public sector bank said.

While the Reserve Bank of India (RBI) doesn’t prohibit banks from extending fresh loans to a defaulter, bankers are generally reluctant in doing so. “You can say the regulator has allowed it, that it was required in order to revive, but the question is that it is very difficult to manage. As a result, most banks don’t have any incentive once it’s treated as an NPA to do anything about it,” a senior banker told FE.

According to Reserve Bank of India (RBI) guidelines on the SDR, banks are required to convert the debt to equity within 210 days of the reference date, which, in the case of Alok Industries, was November 27.

Even before the SDR failed last month, lenders are learnt to have looked at the possibility of enforcing a management change in Alok Industries outside the SDR. The banks are currently also looking at the feasibility of invoking the Scheme for Sustainable Structuring of Stressed Assets (S4A).

Introduced by the RBI in June, S4A allows banks to resolve stressed loans by bifurcating the sustainable portion of the debt from the unsustainable part, and converting the latter into redeemable cumulative optionally convertible preference shares.

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  1. C
    chris jones
    Jan 11, 2017 at 1:05 pm
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