 "Alok Industries logo (Source: www.alokind.com)")
State Bank of India-led lenders to the troubled textile manufacturer Alok Industries are considering restructuring of over Rs 18,000-crore debt under the S4A (scheme for sustainable structuring of stressed assets), sources said.
This follows the lenders failed attempt to implement strategic debt restructuring (SDR) in company, bankers said.
“In the last meeting of joint lenders forum (JLF) which took place after the SDR failed, there was a discussion that S4A can be implemented at Alok Industries. A decision on this will be taken soon,” said a banker, adding that since the city-based company has a good cash flow, S4A is possible.
The Reserve Bank issued the S4A guidelines last month to help both banks as well as struggling companies to tackle debt. The most salient feature of S4A is that it enables debt-laden companies to get working capital from banks, unlike the SDR scheme where a company is not eligible for fresh funds from lenders.
So far, only few companies like HCC could get the S4A option implemented. Bankers say a techno-economic viability study is in the process.
The S4A scheme envisages determination of a sustainable debt level for stressed borrowers, and bifurcation of outstanding debt into sustainable debt and equity/quasi-equity instruments, which are expected to provide upside to lenders when the business turns around.
The city-based Alok Industries owes over Rs 18,000 crore to a consortium of 32 lenders, led by the State Bank of India. In January, the company had informed the stock exchanges that the lenders had invoked SDR in the company, with the reference date being November 27, 2015.
The JLF had said it would acquire up to 65 per cent stake in the company by converting debt into equity. But the SDR failed as banks were unable to convert the debt to equity within 210 days from
November 27, 2015. The company, however, denied having any formal communication from its lenders about the failure of SDR.
"While the lenders would be the right source to provide the clarification you seek, in light of having received no formal communication from them to the contrary, we presume that the SDR continues to be valid," a company spokesperson said in an emailed response when asked whether implementation of SDR scheme has failed.
This follows the lenders failed attempt to implement strategic debt restructuring (SDR) in company, bankers said.
“In the last meeting of joint lenders forum (JLF) which took place after the SDR failed, there was a discussion that S4A can be implemented at Alok Industries. A decision on this will be taken soon,” said a banker, adding that since the city-based company has a good cash flow, S4A is possible.
The Reserve Bank issued the S4A guidelines last month to help both banks as well as struggling companies to tackle debt. The most salient feature of S4A is that it enables debt-laden companies to get working capital from banks, unlike the SDR scheme where a company is not eligible for fresh funds from lenders.
So far, only few companies like HCC could get the S4A option implemented. Bankers say a techno-economic viability study is in the process.
The S4A scheme envisages determination of a sustainable debt level for stressed borrowers, and bifurcation of outstanding debt into sustainable debt and equity/quasi-equity instruments, which are expected to provide upside to lenders when the business turns around.
The city-based Alok Industries owes over Rs 18,000 crore to a consortium of 32 lenders, led by the State Bank of India. In January, the company had informed the stock exchanges that the lenders had invoked SDR in the company, with the reference date being November 27, 2015.
The JLF had said it would acquire up to 65 per cent stake in the company by converting debt into equity. But the SDR failed as banks were unable to convert the debt to equity within 210 days from
November 27, 2015. The company, however, denied having any formal communication from its lenders about the failure of SDR.
"While the lenders would be the right source to provide the clarification you seek, in light of having received no formal communication from them to the contrary, we presume that the SDR continues to be valid," a company spokesperson said in an emailed response when asked whether implementation of SDR scheme has failed.
