Committee considers pro-rata debt servicing for IL&FS 'amber' firms

Pro-rata debt servicing for ‘amber’ companies of IL&FS is learnt to have been discussed at a recent meeting of a high-level committee. At present, companies of IL&FS under the ‘green’ category are servicing debt. Amber companies are those which were capable  to service debts of only certain senior secured creditors. They can not service debt of other creditors. 

Also, in order to make special purpose vehicles of IL&FS group entities equity positive, favourable interest rates for them is under consideration , sources close to the development said. For this, the IL&FS board is likely to engage with creditors. 

These steps would help enhance the enterprise value of assets, helping the infrastructure finance company service its debt. As per the National Com­pany Law Appellate Tribunal (NCLAT) order, debt-servicing was allowed only for ‘green’ companies. The government, however, feels that if amber companies are allo­wed to service debts, it could be a deviation from the waterfall mechanism of the insolvency code. 

The insolvency code mandates payment to all creditors. IL&FS has claims from foreign sovereign guarantors such as Asian Develo­pment Bank which might not get preference in the list of creditors. 

Meanwhile, IL&FS companies will be sold based on the sectors. The company directors have decided that “an asset level resolution and the sale of business verticals comprising a basket of companies and other entities” is the most feasible option for the resolution of the company's debt.

The ten companies in the green category, for which the new directors of IL&FS have init­iated the sale process, include Lalpur Wind Energy Private Limited, Etesian Urja Limited, ONGC Tripura Power Company Limited, IL&FS Paradip Refinery Water Limited, IL&FS Solar Power Limited, Mangalore SEZ Limited, and IL&FS Technologies Limited. Of the total subsidiaries of IL&FS, only 11 remain to be classified. 

Outstanding loans of the IL&FS group are about Rs 60,000 crore, while its overall debt is over Rs 91,000 crore. IL&FS was taken to NCLT under the provisions of the Companies Act in October 2018. The original board was replaced with a government-appointed board. The government replaced the IL&FS board in October last year with six select nominees and moved the company to the National Company Law Tribunal (NCLT) for insolvency proceeding.

The Serious Fraud Invest­igation Office (SFIO) is investigating IL&FS entities. The role of its auditors is being looked into.