Electrosteel gets ‘nod’ from lenders to restructure 6,000-crore loan

MUMBAI: The Kolkata-based Electrosteel Steels has approached lenders to recast its Rs 6,000-crore loan, indicating rising stress in the books of banks due to a slowdown in the economy. Lenders have in-principle agreed to restructure the company’s loan, a move that will give Electrosteel more time to repay its dues, said people who were present at the meeting.

Officials from the banking circle said the lead bank would refer the loan to the corporate debt restructuring ( CDR) cell — a forum where lenders and borrowers mutually decide to restructure loans — sometime in mid-June . Lenders will have to sacrifice close to Rs 800-1 ,000 crore, while the company will have to infuse about Rs 200 crore, said a senior bank official , who did not want be named.

Meanwhile, Electrosteel board on May 20 cleared the proposal to approach CDR to recast the loan. Massive expansion undertaken by several companies during the boom period and the subsequent slowdown in the economy in the following years has resulted in several corporates facing liquidity crunch. Many large companies such as Tulip Telecom and Gammon India, an infrastructure company , have recently approached lenders to recast their loan. According to data provided by CDR, as on March 2013, loans of 401 companies, amounting to Rs 229,013 crore, have been restructured . Bankers expect stress to continue for a while as they expect a huge pipeline of debt recast in the first quarter.