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Sunday, Jul 05, 2009
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Business Daily from THE HINDU group of publications Sunday, Jul 05, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Corporate Corporate - Restructuring Money & Banking - Credit Market More companies knock on debt recast cell’s doors
January to June 2009, 28 corporate accounts with an aggregate outstanding debt exposure of Rs 11,000 crore have been referred to the cell. K. Ram Kumar Mumbai, July 4 The Corporate Debt Restructuring (CDR) Cell, a joint mechanism of banks and financial institutions to restructure debts of viable corporate entities affected by internal and external factors, is over-worked. In the first six months of the calendar year 2009, 28 corporate accounts with an aggregate outstanding debt exposure of Rs 11,000 crore have been referred to the Cell against just five cases with an aggregate outstanding debt exposure of Rs 315 crore in the corresponding period last year. Sectors calling inThe corporate accounts referred to the CDR Cell this year so far are from sectors such as textiles, auto-components, gem and jewellery, infrastructure, steel, sugar, and pharmaceuticals. A sharp contraction in the global export demand, adverse currency movements, foreign exchange derivative bets going wrong, and delay in project implementation are some of the reasons why lenders as well as corporates went knocking at the Cell’s doors. According to a senior public sector banker clued on to the developments on the CDR front, “Some corporates have been done in by the adverse rupee-dollar movement about a year-and-half back. “So, in frenzy, they booked their receivables at a rupee-dollar level which led to losses. Some adventurous corporates gambled in foreign exchange derivatives and burnt their fingers. Yet others wrongly assessed the commercial operation date, whereby though the sanctioned funds were drawn but the project got delayed.” A corporate account is normally restructured by reducing the rate of interest (provided the majority of the creditors are agreeable to the lower yield) to a level that a corporate is in a position to pay; increasing the loan repayment period; partly converting debt into equity; sale of assets, etc. RBI guidelinesCDR norms, according to the Reserve Bank of India guidelines, apply only to multiple banking accounts/syndicates/consortium accounts with outstanding exposure of Rs 10 crore and above with banks and financial institutions. For a corporate account to be referred to the CDR Cell, the support of 60 per cent of creditors by number in addition to the support of 75 per cent of creditors by value is required to make the decision-making process more equitable. In the first quarter (April-June 2009) of the current financial year, 12 corporate accounts with an aggregate outstanding debt exposure of Rs 6,500 crore were referred to the Cell against four cases with an aggregate outstanding debt exposure of Rs 258 crore in the corresponding period last year. Lenders clear Maytas Infra’s CDR plan Subhiksha revival hinges on speedy debt restructuring Sobha Developers gets FIs’ nod to restructure debt RBI makes changes in loan structuring formula More Stories on : Corporate | Restructuring | Credit Market
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