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Banks finalising power firms' debt resolution plans

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Mumbai: Banks, led by State Bank of India, are close to finalising resolution plans for at least half a dozen stressed power companies involving total loans of ₹50,000 crore, which could result in banks taking more than 50% haircut, bank officials said. Haircut is the amount that lenders will have to forgo to settle a loan.

The race for a quick resolution is to meet the August end deadline set by RBI for referring these companies to the bankruptcy court. Lenders are of the view that a resolution for power companies outside the bankruptcy court would fetch them better value compared with their likely recovery under the bankruptcy process.

“Lenders have shortlisted Adani for KSK Mahanadi, Edelweiss ARC is sole bidder for Coastal Energen, JSW Energy is highest bidder for Prayagraj Power, and Agri Trade Resources is likely to acquire SKS Power,” said a senior bank official who requested not to be identified. Lenders are in negotiations with promoters of other companies as well.

“For instance, one time settlement is being negotiated for Jhabua Power,” the person said. Another bank official said, “On an average the haircut is expected to be 50% of the loan amount.

Where the haircut is steep we are considering an option to refer it to bankruptcy court.” On Feb 12, RBI withdrew all debt restructuring schemes and asked banks to classify all restructured loans as non-performing loans.

Further, it said all defaulting companies with loans above ₹2,000 crore should be referred to bankruptcy court if lenders are unable to find a resolution by August end. RBI has said all lenders will have to accept and implement the resolution plan by this month end, failing which the lead bank will have to refer the stressed power company to bankruptcy court. This means that lenders have less than 15 working days to resolve these loans, which would involve approval from board of all lenders.

Some banks still remain scepolution outruptcy officials In almost mentioned gotiations derway valuations. to some officials, lenders are negotiating one-time settletical of resside bank- procedure, said. all cases above, ne- are still un- over deal According senior ment for Jhabua Power at around ₹2,400 crore.

In the case of KSK Mahanadi, lenders are negotiating with Adani to improve its offer from ₹9,500 crore to close to ₹11,000 core, they said.

“The offer from Adani involved debt restructuring and 50% haircut.

It is too early to say if all lenders would agree to the plan,” said a bank official.

“The offer from Edelweiss ARC (for Coastal Energen) is a combination cash and security receipt which too is subject to approval from all lenders,” he said. Lenders have already shortlisted some power companies, including GMR Chattisgarh, Ind-Barath Energy (Utkal), Lanco Anpara and Jindal India Thermal Power, to be referred to bankruptcy court since they have not received any viable proposals from bidders. Banks would, however, be prevented from referring these companies to NCLT if court intervenes in the matter.

Independent Power Producers Association of India had approached Allahabad HC opposing RBI’s mandate to lenders to settle the loans of companies at bankruptcy court if they are not resolved by this month end.

RBI has refused to extend the deadline.




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