IL&FS crisis: Cash-strapped Group makes fresh Rs 450 cr debt default

The cash-strapped Infrastructure Leasing & Financial Services Ltd (IL&FS) continues to err in servicing the debts of various instruments. The troubled company has defaulted at least Rs 450 crore in servicing principal as well as the interest of various borrowings during this month. 

With IL&FS Group failing to service debts due to various creditors, the total amount in defaults has reached nearly Rs 4,300 crore.

The latest default is with regards to the interest payout on non-convertible debentures which was due on October 24. On October 20, payment of the principal amount of Rs 54.90 lakh was due for a Letter of Credit.

Similarly, Rs 100.85 crore was due on October 19 towards principal payment of Letter of Credit and Commercial Paper.

According to the disclosures made by IL&FS, the company defaulted on all these payments.

“The default number will keep on increasing every week as there are several payouts lined up every three to four weeks,” said a Mumbai-based analyst.

As per REDD Intelligence, a debt analytics provider, the loans at risk pertaining to the IL&FS Group now stands at Rs 30,000 crore. The group’s total debt stands at Rs 91,000 crore, of which Rs 23,000 crore is unsecured while the rest are secured debts.

“The only immediate solution for the organisation is to monetise its assets to service some of these borrowings or else the default cycle will become a routine affair, which in a way has already started. The unsecured loans and some secured ones will take a hit and may even result in haircuts,” added the analyst tracking IL&FS Group.

However, the percentage of haircuts that the secured and unsecured lenders will be forced to take continues to remain a question. At the moment, there isn’t any clarity on the commencement of its asset monetisation plans. However, this may take a couple of months to commence.

During IL&FS Transportation Networks’ Board meeting on Thursday, the directors discussed divestment of stake in “certain road projects for easing the liquidity concerns and decided to seek assistance from the Financial and Transaction Advisors appointed by IL&FS for the process.”

On Wednesday, Sebi chairman Ajay Tyagi said that failure to monitor the end-use of funds resulted in the recent crisis.

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According to him, “One of the issues that this episode brought out is the inter-connectedness arising as a result of complex corporate subsidiary structures and how the maze of subsidiaries facilitate masking the end use of funds.”

Source: DNA Money