Cash-strapped IL&FS wins shareholder approval for restructuring plan; Alvarez & Marshal to chalk out revival strategy

Mumbai:  Debt-laden Infrastructure Leasing & Finance Services (IL&FS) said on Saturday it is working on a detailed restructuring plan and will appoint Alvarez & Marshal to formulate a turnaround strategy. The decision was taken by the crisis-ridden company’s board after the AGM on Saturday. “We will develop a comprehensive plan for restructuring so as to be able to demonstrate to the creditors and the shareholders that the intrinsic value of the group is sufficient in repaying its liabilities. We have decided to appoint a specialist agency – Alvaraz & Marshal–to take this plan forward,” vice-chairman and managing director Hari Sankaran said in a video released late evening to the media after the board meeting. Financial advisory firm Alvarez & Marshal will develop the plan, seek approvals from the board and all stakeholders, and then proceed to implement it, Sankaran said. He said the company would continue to pursue its application under the relevant section of the Companies Act to ensure that it gets a moratorium to detail out revival plans in a manner that can satisfy both creditors and shareholders with its capacity to service debt and equity, he said. The company will implement the asset monetisation plan in a manner that is consistent with the comprehensive restructuring plan, he added. The group has lined up a plan to divest as many as 24 projects to raise around Rs 30,000 crore and pare its mount of debt, which as of the June quarter stood at over Rs 91,000 crore, of which over Rs 57,000 crore is from state-run banks. [caption id=“attachment_5251861” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] Earlier in the day, the annual general meeting of IL&FS, which was expected to throw up concrete plans to tide over the liquidity crisis at the infra major, failed to make any headway with no clear commitment from its large shareholders to take part in the Rs 4,500-crore rights issue. The development comes a day after Reserve Bank of India (RBI) deputy governors N S Vishwanathan and M K Jain met representatives of LIC, the single largest owner with 25.34 percent, and Japan’s Orix Corporation, that owns 23.54 percent, and reportedly asked them to ensure the systematically important NBFC does not go belly up. The development also comes after the insurance regulator Irdai has reportedly asked the entities under its watch to declare its exposure to the crippled company. The city-headquartered engineering and infra lending conglomerate owes over Rs 91,000 crore to lenders but has been on a defaulting spree since 27 August. So far, it has failed to make over a dozen payments. IL&FS Financial Services Saturday informed exchanges that it has defaulted on payment of Rs 71.38 crore of term loan. It also failed to make interest payment of Rs 8.69 crore on NCDs and another Rs 162.9 crore towards interest and principal payment of a different NCD. At the AGM, Sankaran addressed several issues of shareholders that have been concerning them. “The strategy has three parts: to successfully complete the ongoing rights issue to enable the company to recapitalise itself; to sell assets and repay our creditors; and third is to be able to get liquidity to repay our debtors till our asset sale cycle begins,” he said in a separate video statement released after the AGM. The company has already launched a Rs 4,500-crore rights issue, from which HDFC and the Abu Dhabi sovereign fund, which collectively own a little over 21 percent, are keeping away. The company is also looking for an immediate liquidity of Rs 3,000 crore from lenders. Some shareholders who attended the AGM, which was not open to the media, told waiting reporters that Sankaran also told the meeting that they are in discussion with the government and the RBI to put in place a legal framework before it could sell assets.

“Proposed asset sale can happen only with a legal framework as the company is in default. They have kept a timeline of 45 days to get the legal framework in place to commit to sell assets,” a shareholder said.

Another shareholder said the management also hinted at retrenchments as well as salary and bonus cuts to reduce cost. The debt-laden company has set a target of selling over two dozen assets to raise around Rs 30,000 crore. It is eyeing to raise Rs 12,000-16,000 crore by selling its transport business (ITNL), the shareholder added. As many as 14 out of 19 road projects of ITNL have been completed and are saleable, they said. “The bulk of rights issue LIC, Orix and SBI are likely to subscribe. They are hoping to raise full Rs 4,500 crore,” another shareholder said. The Abu Dhabi Investment Authority, HDFC, Central Bank of India and SBI hold 12.56 percent, 9.02 percent, 7.67 percent and 6.42 percent, respectively, in the cash-strapped company. The IL&FS group is facing a serious liquidity crisis and has defaulted on interest payment on various debt repayments since 27 August.