Videocon headed for bankruptcy court, but Jaypee may be saved

Lenders are gearing up to refer Videocon Industries to the bankruptcy court as they are unsure if the company's proposed debt recast programme will clear the Reserve Bank of India's conditions to deal with defaulters, three senior bank officials told The Economic Times.

However, they expect to complete the restructuring of Jaiprakash Associates' account before the 31 December deadline, according to the ET report.

Videocon with Rs 47,500 crore of debt and Jaiprakash Associates with Rs 26,000 crore were the top two in a bunch of 29 defaulters that the Reserve Bank of India listed in August and ordered lenders to find a resolution by 31 December. Barring a handful of the accounts on this second list from the RBI, most would be referred to the National Company Law Tribunal (NCLT) this week, the officials said, speaking on the condition of anonymity.

In a circular in August, the RBI said any debt reconstruction package outside the NCLT would be valid only if two rating firms gave investment grade rating to the debt's sustainable portion, which will remain on the company's book even as the unsustainable part is restructured.

"Videocon Industries has proposed a debt recast package to lenders which include monetisation of assets such as land in metro cities and repayment of loan over 15 loans," said one of the bank officials. Lenders have submitted the proposal to the RBI which in turn will appoint two ratings firms to rate the debt portion.

At least three lenders told ET that they were not very hopeful of it receiving investment-grade rating on the sustainable debt since the company's proposal does not have a concrete repayment plan for the sustainable portion of the debt since the company's proposal does not have a concrete repayment plan for the sustainable portion of the debt.

"A lot of it is based on how well they are able to monetise their assets," said another bank official.

The lead lender, State Bank of India, has sought additional time from the regulator to recast the loan but as a backup plan it has initiated dialogues with resolution professionals, said the officials.

In June when it issued the first list of a dozen companies - such as Essar Steel, ABG Shipping, Bhushan Steel and Lanco - the central bank had directed banks to immediately refer the cases to the bankruptcy court.

The outstanding loans of the 29 companies on the second list total about Rs 2 lakh crore. Of these, 10 have already been referred to the bankruptcy court, while some are in the final stages of loan restructuring. In some cases, the lenders have sold the loans to asset reconstruction companies.

SBI, the lead bank, has put on the block loans of Asian Colour Coated, while loans to BILT and Jai Balaji have already been sold to Edelweiss ARC.

For Uttam Galva Steel and Jaiprakash Associates, banks are in the final stage of negotiations. Lenders have restructured the debt of Soma Enterprises under the S4A scheme (Scheme for Sustainable Structuring of Stressed Assets) and in case of Anrak Aluminium, they have entered into a one-time settlement, the ET report says.