Banks to recast Rs 5,000-cr debt of Era Infra

May offer interest rate moratorium for two and half years

A consortium of 20 lenders has decided to restructure the Rs 5,000-crore debt of Era Infrastructure, a Delhi-based infrastructure developer, in the quarter ending March. The case has been admitted to the corporate debt restructuring (CDR) cell and the contours of the recast have already been finalised.

About Rs 4,000 crore of the exposure is fund-based; the rest is in the form of bank guarantees and letter of credits. Bankers said loans of another five-six lenders not in the consortium, largely term loans, would also be restructured.

“We plan to do deep restructuring, which will have a long moratorium period, as the projects are viable and the issues surrounding the projects will be resolved,” said a banker involved with the debt restructuring. Banks may offer an interest rate moratorium for two and a half years and a capital moratorium of five years.

A case is approved for CDR when 75 per cent of the lenders, in value terms, agree to restructure the debt. According to latest Reserve Bank of India norms, any standard restructured advance attracts provisioning of five per cent. In addition, banks have to provide for diminution in the net present value which, in the case of Era, is likely to be nine per cent.

Bankers said Era Infrastructure was unable to execute projects, as the National Highways Authority of India wasn’t realising funds for the work completed. Besides, there were cost overruns. The company is developing about nine projects, including some in the roads sector.

Banks have been burdened with restructuring debts of the infrastructure sector, as various clearances such as those related to environment and land are stuck. Till September 2013, infrastructure loans worth Rs 35,000 crore were restructured; this accounted for 18 per cent of the total restructured debts. As of September-end, about 260 cases were in CDR, with aggregate debt of Rs 1.96 lakh crore. Debt restructuring proposals from the iron and steel sector led the pack (21 per cent of the total restructuring proposals), followed by the infrastructure, textiles and power sectors.