Beleaguered IL&FS defaults on ICD payments worth Rs 1.72 billion

Beleaguered infrastructure financier Infrastructure Leasing & Financial Services (IL&FS) has defaulted on interest and principal payments on inter-corporate deposits (ICDs) of Rs 1.72 billion due last Friday.

In a statement to the stock exchanges, IL&FS said the interest default by the company on September 29 was set off by IndusInd Bank towards interest for Rs 164 million against interest service reserve account maintained by the company with IndusInd Bank. “The liability of IL&FS thus stands cancelled to that extent for IndusInd Bank for the month of September 2018,” it said.

In June this year, IndusInd Bank had signed a definitive share purchase agreement with IL&FS to acquire IL&FS Securities Services (ISSL). In the last week of September, IndusInd announced that it had received all regulatory approvals to take over ISSL. The closure of the deal is underway, the statement said.

Analysts have said these asset sales will help reduce overall debt of the company, but the sale proceeds would go to the banks that are holding charge on assets. IL&FS had a consolidated debt of Rs 910 billion as in March this year.

Source: Annual reports

“Asset sales like the expected sale of IISL to IndusInd Bank for Rs 15 billion may solve some issues but is unlikely to bring in new cash into the company as these assets may be pledged for borrowings. IndusInd Bank has an unsecured loan of Rs 7.5 billion to Chenani-Nashri Tunnelway special purpose vehicle (SPV), and there are chances that the shares of IISL may already be pledged to lenders. The company has not provided any information on asset pledges,” distressed debt specialist firm, REDD Intelligence, said in a report dated September 27.

The research firm said the secured loans at the parent level of IL&FS are less secure than previous estimates. “There are Rs 120.8 billion of secured loans at IL&FS parent and we expect these to be second lien loans secured against general assets of the company, loans to subsidiaries and subsidiary equity. Since these do not benefit from direct cash flows, the haircut on this exposure may be higher compared to first lien loans, which are secured against project cash flows,” it said.
 

Meanwhile, IL&FS Trans-portation, a subsidiary of IL&FS, said that it has also defaulted to interest payments for three tranche of non-convertible debentures due on October 1.