Many with lower exposure averaging Rs 200-500 cr being referred for rejig

The Corporate Debt Restructuring (CDR) Cell is examining two options to hasten the process of resolving cases of corporate distress.

One is tapping private equity players and the other is initiating mergers and acquisitions.

An increase in the number of debt restructuring cases in the April-June period has prompted the Cell to explore these options.

The current restructuring exercise has been time consuming. The number of CDR cases reported in the first quarter was higher at 24 (with debt aggregating about Rs 13,400 crore) as against 16 (debt: Rs 4,700 crore) in the year ago period.

Economic scenario

Given the adverse economic environment, the flow of cases into the CDR Cell is expected to continue till December-end, said a senior banker.

“Private equity players have been knocking on our doors looking for suitable investment opportunities in distressed companies. However, nothing has materialised so far…. We are not averse to examining the PE route if it helps in quick turnaround of CDR cases,” said a senior CDR official.

PE investments could help free up lenders’ funds that can be used to originate new loans.

Besides attracting PE investments, the official emphasised that the CDR Cell is also in a position to play match-maker and initiate mergers & acquisitions.

The CDR mechanism came into existence in 2001 to restructure debts of viable corporate entities affected by internal and external factors. A Cell floated by banks and financial institutions screens and implements all corporate loan restructuring proposals.

Smaller debt restructuring cases

According to Mr B. Ravindranath, Chairman, CDR Cell, a large number of corporate debt restructuring cases with lower debt exposure (averaging Rs 200 -500 crore) are being referred to the Cell.

Earlier, the situation was the other way round — fewer corporates with debt exposure running into a few thousand crore rupees came up for restructuring.

Units in the iron and steel, infrastructure, textiles, telecom, fertilisers, non-banking finance companies and cement sectors account for the maximum number of cases referred to the CDR Cell.

kram@thehindu.co.in

(This article was published on July 17, 2012)
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