IL&FS on the verge of restructuring

In a major breather to the crippled infra lender and engineering group IL&FS, its largest shareholders backed its plans to raise as much as Rs15,000 crore ($2.1 billion) through a non-convertible debt issue, hike the firm’s borrowing limit by 40 per cent to Rs35,000 crore and increase its share capital through a rights offer, the company said in a filing.

The company’s major shareholders LIC and Orix Corp and State Bank of India on Saturday announced they would subscribe to the proposed Rs4,500 crore rights issue of the company.
The announcement came at the annual general meeting (AGM) of the company, which has been defaulting on debt obligations.
The shareholders are expected to plough in the investment after their respective boards approve the plan with funds, hopefully, being released by month-end.
IL&FS group as a whole remains an important institutional player in the infrastructure sector with lots of valuable assets and is also in RBI’s list of systemically important financial companies.
Its defaults on commercial paper from August sparked concern among investors, especially those holding mutual funds invested in such debt, and forced banks and pension fund managers to brace for further losses.
And, with some of its investors such as Central Bank of India, facing prompt and corrective action by the Reserve Bank of India, IL&FS’ failure would have led to a sort of contagion affecting the whole financial sector. 
Reports said all shareholders will get an opportunity to participate in the rights issue, failing which even a third party could participate in the investment opportunity.
A meeting of IL&FS is reported to have come out with a comprehensive plan to restructure the group in terms of repaying creditors through asset sale and recapitalisation to restore normalcy.
IL&FS’s investors include insurance giant Life Insurance Corporation of India, Japan’s Orix Corporation, top lender State Bank of India, largest mortgage lender Housing Development Finance Corporation and VK Sharma, the chairman of biggest shareholder LIC, on Friday said the beleaguered group can raise 600 billion rupees by selling assets.
IL&FS on Saturday also appointed Alvarez & Marsal to devise a restructuring plan that will be implemented upon approval by the board and stakeholders.
IL& FS group has one of the largest wind assets, including IL&FS Energy’s 1000 megawatts operational wind power; 19 assets in the road sector out of which 14 are operational as   well as operational assets in other verticals.