Infrastructure Leasing & Finance Services Ltd (IL&FS) and its subsidiaries have moved the National Company Law Tribunal’s (NCLT’s) Mumbai Bench seeking “certain reliefs” in connection with filing of a scheme of arrangement under Section 230 of the Companies Act. The IL&FS group, which has liabilities of over Rs 91,000 crore, has defaulted on repayments thrice in the past one month.
Sections 230 to 240 of Companies Act, 2013, contain provisions on ‘compromises, arrangements and amalgamations’ that cover compromise or arrangements, mergers and amalgamations, corporate debt restructuring, demergers, fast track mergers for small companies/ holding subsidiary companies, cross border mergers, takeovers and amalgamation of companies in public interest.
“We hereby inform that IL&FS has filed an application with the National Company Law Tribunal on September 24, 2018 seeking certain reliefs in connection with filing of a scheme of arrangement under Section 230 of the Companies Act, 2013 in respect of IL&FS and certain subsidiaries, joint ventures, associate of the company which scheme will be prepared in compliance with applicable law and subject to necessary consents of the shareholders, creditors, regulators and the board of directors of the respective entities,” IL&FS Transportation Networks said in a stock exchange filing.
When a compromise or arrangement is proposed, the Tribunal may order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs. The IL&FS group owes money to banks, mutual funds, NBFCs and other investors.
IL&FS Financial Services on Monday defaulted on interest payments on commercial papers, its third default in the recent past. The RBI has banned the company from accessing commercial papers market for up to six months from the date of repayment of this obligation. “The commercial papers which were due on September 24, could not be serviced by the company,” the company said in a BSE filing.
IL&FS Financial Services managing director and chief executive Ramesh C Bawa and some key board members had resigned last week. The RBI has started a special audit of the company after its default in the CP market recently. IL&FS group defaulted on a short-term loan of Rs 1,000 crore from Sidbi, while a subsidiary has also defaulted Rs 500 crore dues to the development finance institution.
The IL&FS group has a consolidated debt of Rs 91,000 crore with IL&FS alone having nearly Rs 35,000 crore debt.
While downgrading the company’s rating on debt worth Rs 14,248 crore to D status this week, Care Ratings said “the rating revision takes into account the recent instances of irregularities in servicing of debt by the company. The liquidity profile of the group continues to be under stress on account of delay in raising funds from the promoters’ and impending debt payments. Further, the company’s plans to raise funds from promoters are yet to be finalized,” Instruments with ‘D’ rating are in default or are expected to be in default soon.
Rating agency ICRA, which also downgraded its Rs 8,075 crore debt to ‘D’ category, said the liquidity position at the group levels remain under challenge given the delays in raising funds from the promoters in accordance with the earlier stated plans, deterioration in the credit profile of key investee companies and sizeable debt repayment obligations.