‘Pension, provident funds have ₹9,134-cr exposure to IL&FS’

Our Bureau Mumbai | Updated on April 12, 2019 Published on April 12, 2019

The debt-laden NBFC says it cannot be repaid immediately as it will hit the resolution process

Pension and provident funds have an exposure of ₹9,134 crore to debt-ridden Infrastructure Leasing and Financial Services (IL&FS), but these cannot be repaid immediately as it will impact the IBC-led process.

This disclosure was made by IL&FS to the National Appellate Company Law Tribunal in an affidavit, which will take up the matter for hearing on April 16.

“Whilst the objective of payment to certain categories of creditors (provident funds and pension funds) is laudable, the Union of India and Respondent No 1 submit that the same is not feasible for the following reasons: any payment which is ad hoc in nature will be contrary to the Resolution Framework Report...and any payment which disregards the legal sanctity and priority of payments of creditors will destabilise the financial market and distort or disarray borrowings by corporates and lending by banks and financial institutions,” said IL&FS.

The NCLAT had, on April 8, sought details of investments by provident funds and pension funds in amber firms of IL&FS.

According to the affidavit, provident funds had invested ₹6,759.73 crore and pension funds had put in ₹2,374.72 crore in paper of IL&FS and its subsidiaries.

Of the money raised, ₹4,278.12 crore was borrowed by IL&FS, ₹2,940.13 crore was borrowed by IL&FS Financial Services (IFIN), and ₹1,916.20 crore by IL&FS Transportation Networks (ITNL) from PF and pension funds. This, in turn, was invested by IL&FS and intermediate holding company into the project-level special purpose vehicles such as Hazaribagh Ranchi Expressway Ltd (HREL), Jharkhand Road Project Implementation Company Ltd (JRPICL), West Gujarat Expressway Ltd (WGEL), and Moradabad Bareilly Expressway Ltd (MBEL).

The four are amon the 13 ‘amber’ companies of IL&FS, and are unable to meet their debt obligations and are permitted to make only “going concern” payments for goods or services obtained after October 1, 2018, IL&FS has pointed out.

The four firms have disposable cash of ₹ 1,134 crore during the testing period, while their total debt is ₹2,162 crore.

IL&FS has further submitted that the money being collected for each of the amber entities is being held in trust, and will be used for discharging the liabilities of creditors of these entities once they are sold off.

“Any ad hoc payments made at this stage will disturb the ongoing resolution process, and the Union of India opposes any such ad hoc distribution of amounts to financial creditors, as it will be detrimental to the ongoing efforts,” it has said.

IL&FS has already initiated the sale process of 12 of the 13 amber entities, including these four firms.

Published on April 12, 2019
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