Lenders exploring debt recast for REI Agro

Banks have already classified REI Agro as Special Mention Account

The lenders of debt-stricken REI Agro, who have exposure of Rs 4,000 crore to the company, are considering taking the agro processing firm to the corporate debt restructuring (CDR) cell. Banks have already classified REI Agro as a special mention account (an account for which payment is due for 30-90 days), under the Reserve Bank of India’s norms for early detection and resolution of stressed loans.

REI Agro’s payment is due for 60 days.

A senior public sector bank executive involved in CDR cases said talks related to CDR for the rice-processing company were in early stages. Further discussions among members of the consortium of banks were needed to take a decision on the matter, he added.

United Bank of India has already filed a winding-up petition against REI Agro Ltd in the Calcutta High Court. UCO Bank is another lender to the company.

On Monday, the REI Agro stock closed at Rs 3.8 on BSE, down 4.7 per cent.

For 2013-14, the company posted a net loss of Rs 38.35 crore on a standalone basis, on net sales of Rs 4,523.2 crore. For 2012-13, it had recorded a net profit of Rs 211.01 crore on net sales of Rs 5,089.9 crore.

After its board meeting on May 30, the company had informed BSE its board had approved finalising and initiating a corrective action plan by the joint lenders’ forum to address its debt. The board had also accepted the resignation of Sanjay Jhunjhunwala from the post of chairman and director, with immediate effect. The board elected managing director Sandip Jhunjhunwala as chairman.

In a filing with BSE, the company said owing to a liquidity crunch, it wasn’t able to procure adequate raw material in 2013-14. This had led to a temporary shutdown at one of its units. It added it was taking all possible measures to improve efficiency, including rationalisation of costs and operations.

Last month, CARE Ratings had downgraded the company’s short- and long-term bank facilities (credit) from ‘BB+/A4+’ to ‘D’. This followed delay by the company in servicing debt.

The company’s cash flow had been severely impacted by lower-than-expected cash accruals from operations and an increase in working capital requirements. This had resulted in inability to meet debt obligations on time, CARE said.

THE STORY SO FAR

* REI Agro suffered a loss of Rs 38.8 crore in FY14

* The rice processing outfit is facing a liquidity crunch

* Lenders are working on a corrective action plan

* United Bank of India has filed a winding-up petition against REI

* CARE Ratings has lowered rating for loans to ‘D’ grade