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In a bid to resolve its recent liquidity issues and inability to service debt obligations, cash-strapped Infrastructure Leasing & Financial Services (IL&FS) has filed an application with the National Company Law Tribunal (NCLT) seeking relief in connection with the filing of a scheme of arrangement in respect of the company, its subsidiaries and indirect subsidiaries.
The application has been filed with the NCLT’s Mumbai bench under Section 230 of the Companies Act, 2013. This section deals with the power to compromise, or make arrangements with creditors and members.
Term loans
If the NCLT accepts the application for scheme of arrangement, then it could have implications for banks in terms of taking haircuts on loans and making provisions.
Out of IL&FS’ consolidated borrowings of ₹91,091 crore, term loans amounted to ₹55,870 crore as of March-end 2018.
IL&FS Transportation Networks (ITNL), IL&FS Engineering and Construction Company (IECCL) and IL&FS Financial Services (IFIN) have separately informed the exchanges about their parent IL&FS filing a scheme of arrangement.
Rating downgrades
This application for a scheme of arrangement comes in the backdrop of IL&FS and some of its subsidiaries facing rating downgrades and their inability to service commercial papers and intercorporate deposit having a ripple impact on the financial system.
The three above-mentioned companies said the scheme would be prepared in compliance with applicable law and subject to necessary consent of the shareholders, creditors, regulators and board of directors of the company.
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