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Banks finalising power firms debt resolution plans

Power News - Published on Fri, 17 Aug 2018

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Economic Times reported that banks, led by State Bank of India, are close to finalising resolution plans for at least half a dozen stressed power companies involving total loans of INR 50,000 crore, which could result in banks taking more than 50% haircut. Haircut is the amount that lenders will have to forgo to settle a loan. The race for a quick resolution is to meet the August end deadline set by RBI for referring these companies to the bankruptcy court.

Lenders are of the view that a resolution for power companies outside the bankruptcy court would fetch them better value compared with their likely recovery under the bankruptcy process. A senior bank official who requested not to be identified said that “Lenders have shortlisted Adani for KSK Mahanadi, Edelweiss ARC is sole bidder for Coastal Energen, JSW Energy is highest bidder for Prayagraj Power, and Agri Trade Resources is likely to acquire SKS Power.”

Lenders are in negotiations with promoters of other companies as well. The person said that “For instance, one time settlement is being negotiated for Jhabua Power.”

Another bank official said, “On an average the haircut is expected to be 50% of the loan amount. Where the haircut is steep we are considering an option to refer it to bankruptcy court.” On Feb 12, RBI withdrew all debt restructuring schemes and asked banks to classify all restructured loans as non-performing loans. Further, it said all defaulting companies with loans above ?2,000 crore should be referred to bankruptcy court if lenders are unable to find a resolution by August end.

RBI has said all lenders will have to accept and implement the resolution plan by this month end, failing which the lead bank will have to refer the stressed power company to bankruptcy court.

This means that lenders have less than 15 working days to resolve these loans, which would involve approval from board of all lenders.

In the case of KSK Mahanadi, lenders are negotiating with Adani to improve its offer from INR 9,500 crore to close to INR 11,000 core, officials said. He said that “The offer from Adani involved debt restructuring and 50% haircut. It is too early to say if all lenders would agree to the plan. The offer from Edelweiss ARC (for Coastal Energen) is a combination cash and security receipt which too is subject to approval from all lenders.”

Lenders have already shortlisted some power companies, including GMR Chattisgarh, Ind-Barath Energy (Utkal), Lanco Anpara and Jindal India Thermal Power, to be referred to bankruptcy court since they have not received any viable proposals from bidders.

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Posted By : Rabi Wangkhem on Fri, 17 Aug 2018
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