Lenders to the troubled textile manufacturer Alok Industries are considering restructuring of the over Rs 18,000 crores debt under the S4A (scheme for sustainable structuring of stressed assets). The Reserve Bank issued the S4A guidelines last month to help both banks as well as struggling companies to tackle debt. The 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.
The S4A scheme envisages determination of a sustainable debt level for stressed borrowers, and bifurcation of outstanding debt into sustainable debt and equity or quasi-equity instruments, which are expected to provide upside to lenders when the business turns around.
Alok Industries owes over Rs 18,000 crores to a consortium of 32 lenders, led by the State Bank of India. So far, only a few companies could get the S4A option implemented. Since Alok has a good cash flow, S4A is possible.
In January, the company had informed the stock exchanges that the lenders had invoked strategic debt restructuring (SDR) in the company, with the reference date being November 27, 2015.
The Joint Lenders Forum 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.
Monday, 25 July 2016 13:14
