Banks, bondholders to recover less from insolvencies under new proposal

Secured creditors, typically banks and bondholders, would continue to have first claim on proceeds of an insolvency resolution plan, but only up to the liquidation value of the corporate debtor

India’s banks and bondholders stand to recover less in insolvency resolutions under a proposed change in law that would apportion more to junior creditors, such as unpaid vendors and the government, according to restructuring and insolvency professionals.
 

The Indian government seeks to achieve an “equitable scheme of distribution of proceeds,” it said in a discussion paper issued in January that recommends other significant changes to the Insolvency and Bankruptcy Code. But secured creditors, who are generally paid out before those with unsecured claims, may be less amenable to the IBC if those changes are ultimately put into effect, insolvency professionals