With losses mounting and 32 banks staring at the possibility of over Rs 18,000 crore debt of Alok Industries Ltd turning into non-performing assets, lenders are struggling to salvage their loans to the textile manufacturer.
The bid of lenders to invoke the provisions of Strategic Debt Restructuring (SDR) and revamp its debt has not worked out as banks were unable to finish the SDR process within the stipulated RBI deadline of 210 days after fixing the reference date. The next option could be debt revamp under the Reserve Bank’s latest scheme — Scheme for Sustainable Structuring of Stressed Assets (S4A), said a banking source.
However, the company said it is unaware of the failure of the SDR. “We have to inform you that we have no such communication from our lenders and accordingly continue to presume that the SDR remains valid,” the company said in a statement on Wednesday.
- SBI to auction 12 bad accounts this month to recover over Rs 1325 crore
- Banks seek review of RBI norms on restructuring of stressed assets
- China bank withdraws insolvency petition against Reliance Communications
- Banks invoke SDR for Lavasa Corporation
- Reliance Communications under SDR, gets 7 months to cut debt
- Strategic Debt Restructuring scheme: ‘A solution, with its own problems’
Lenders had formed a Joint Lenders’ Forum (JLF) and decided to invoke the provisions of SDR and fixed the reference date of November 27, 2015. However, banks were unable to sell assets or acquire stake in the company as the Bombay High Court stayed the sale of assets or change in the equity structure following a winding-up petition filed by some unsecured investors for recovery of $ 55 million. Alok Industries had posted a loss of Rs 3,722 crore and a revenue of Rs 11,752 crore for the fiscal 2015-16.
“As of date, we continue to await a confirmation from our lenders on the process they intend to follow to remedy our situation,” the company informed the stock exchange last week.
“S4A is one of the options provided the legal hurdles are removed. Much will depend on the High Court’s decision,” said a banking source. Under S4A scheme, the debt of the company will be bifurcated into two parts — sustainable debt, which cannot be less than 50 per cent of existing debt and will have to be serviced over the same terms as that of existing facilities. The other unsustainable part of the loan can either be converted into equity/ redeemable optionally convertible preference share or optionally convertible debentures, with clearly spelt out terms.
“Owing to scarcity of working capital and consequent impact on operations, the company had not been able to perform operations at optimal levels, leading to decline in the operating profits and liquidity in the company and consequently, the company’s account had slipped into the SMA2 category — where principal or interest payment is overdue between 61-90 days — with most banks,” the company had said earlier.
Lenders had formed a JLF and formulated a Corrective Action Plan (CAP) for the company in order to resolve the stress in the account of the company.