About half the assets of debt-laden infrastructure financier IL&FS have been put up for sale, a top government official said on Tuesday, pointing also to measures that would be taken to prevent frivolous bidding for local companies being sold through bankruptcy administration.
Corporate affairs secretary Injeti Srinivas told the media Tuesday on the sidelines of a conference on bankruptcy that of the 100-odd IL&FS group companies that have not yet been grouped into green, amber or red brackets based on their solvency profiles, most would fall in the red category, with a few entities grouped under the amber bracket. “It is very unlikely that in the remaining 100, you will have a green company springing up. Essentially, the bulk of the companies are in red — that is they are not solvent and they are not able to repay their debt,” said Srinivas.
To be sure, the financier’s domestic entities have been classified according to their ability to meet payment obligations. In total, 22 companies that can meet all payment commitments have been classified as green. These companies have been directed to service their debts as per schedule.
There are 10 amber entities that can meet only senior secured debt obligations. Furthermore, 38 red entities cannot even service senior secured debt.
Srinivas also said New Delhi would soon take steps to discourage people from making frivolous bids and then backing out. Liberty House, which had bid successfully for Amtek Auto Ltd, had refused to meet the agreed upon payment commitments, complaining that the process followed was flawed.
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Srinivas said the government was looking to prevent such incidents, and questioned whether such applicants be forced to pay for insolvency proceedings and be barred from taking part in resolution processes in the future or even face criminal charges. “These are all questions and there must be a definitive answer. This is one area I think the government is very much focused on and would soon bring some sort of effective steps to see how we discourage people from making frivolous sorts of bids and then backing out,” he said.
On the order by the NCLAT preventing lenders from recognising any IL&FS group accounts as Non-Performing Assets (NPAs) without prior permission from the tribunal, Srinivas said that the court had taken a decision based on the fact that the lenders did not have the ability to make recoveries.
“IL&FS has not been admitted to the IBC. It has not gone to NCLT but by virtue of a special dispensation it is enjoying those benefits (moratorium against claims by lenders),” he said.
“The court has said that because I have given moratorium to IL&FS in light of national importance and public interest, I am ….giving this benefit to the creditors without examining the contention of rival parties,” said Srinivas.
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The central bank had earlier turned down requests by lenders of IL&FS to allow them to not classify the accounts of IL&FS as NPAs.
Srinivas also said that the government was working on a group insolvency solution under the insolvency and bankruptcy code (IBC). “There may be a situation that a holding company is borrowing but routing it to Special Purpose Vehicles (SPV), with assets being held at the SPV and liabilities at the holding company. In such situations, unless you have some group insolvency type of solution, there may be an inequitable sort of resolution,” he said.
'Effective steps' on anvil to deal with frivolous bids under IBC, says official
