Infrastructure Leasing & Financial Services Limited (IL&FS) is one of India's leading infrastructure development and finance companies. The projected recovery from the IL&FS resolution procedure is about 61 per cent of total group debt, which is higher than the average 39 per cent recovery by lenders under the Insolvency and Bankruptcy Code (IBC) process.
According to IL&FS's MD, C.S. Rajan, the business has accomplished this through a combination of court-approved transactions and settlements. Given the lack of a legislative or regulatory framework to deal with group bankruptcy, the board used a multipronged strategy, focusing on resolution, restructuring, and recovery depending on the kind of asset. In the April update, the new board modified the estimates of aggregate debt recovery to Rs. 61,000 crore. This was an increase of Rs. 5,000 crore over previous estimates and represented a resolution over 61% of group debt of approx. Rs. 99,000 crore as of October 2018. This includes the debt addressed through resolution, restructuring and liquidation across 347 IL&FS Companies. As of the end of March 2021, out of 347 entities, 186 have been resolved with Rs. 43,000 crore of debt addressed.
The quarterly newsletter of the Insolvency and Bankruptcy Board of India (IBBI) for the March 2021 Issue reveals that recovery through resolution amounted to about 39%. And recovery through liquidation is around 4%. According to bankers, recovery in the IBC process has had extreme outcomes. There have been cases like Essar Steel and Bhushan Steel where lenders got all their money back, and others like Videocon and Jet Airways, which were pretty close to liquidation value. What the IBC data does not show is the one-time settlement cases that are happening outside the insolvency process. In many of these cases, the promoters know that they can lose everything should their company go into bankruptcy, which is prompting them to come forward for a settlement.
The IL&FS board had the advantage of all options, and they were not pushed into a ‘sale or liquidation' situation. According to Rajan, the resolution framework approved by NCLT has been devised to optimise the recovery for various classes of creditors.
Comments