Jain Irrigation’s Restructuring Plan Nears Approval From Banks

Lenders to distressed irrigation equipment manufacturer Jain Irrigation Systems Ltd. are likely to sign off on a resolution plan for the company under the Reserve Bank of India’s restructuring guidelines.

The lending consortium is mulling a resolution plan which involves extending the repayment period for Rs 4,600 crore in outstanding debt from two years to five years, said two people with direct knowledge of the discussions. Lenders will not need to take any haircut on the principal amount as part of the plan, they said.

A final proposal is likely to be submitted to the lending consortium in a few days. After that, the lenders will vote on the proposal and the restructuring plan will be implemented, the people cited earlier said.

Emails sent to Jain Irrigation and lead lender State Bank of India on Thursday remained unanswered.

According to the people cited earlier, bankers were unsure of allowing the restructuring process to go forward as they were unclear on whether the company will be able to meet even the extended repayment period. Without a restructuring plan, the lenders would have been forced to initiate insolvency proceedings against the company. However, since the central government has now decided to suspend all fresh insolvency proceedings for 12 months, the banks are willing to consider the option to restructure Jain Irrigation’s debt.

A restructuring proposal for the company has been under discussion since September 2019 when an inter-creditor agreement was signed among the domestic lenders. The inter-creditor agreement allows banks to work on a restructuring plan and implement it within 210 days from the day of default.

A resolution plan, according to guidelines issued by the RBI last year, should have been finalised by March 31, 2020, failing which the lenders would be required to make accelerated provisions against the account. However, last month, the regulator allowed banks to defer any accelerated provisions by 90 days for restructuring cases under discussion, due to the national lockdown.

In March, S&P Global Ratings had cut Jain Irrigation’s rating to ‘Default’ grade after the company’s international unit defaulted on repayment of interest dues worth $200 million on its green bonds, Bloomberg had reported.

Before that, in October 2019, Jain Irrigation’s rating was cut to ‘D’ by Care Ratings due to delay in servicing domestic debt because of a slowdown in collection of receivables.

As part of its restructuring plan, the company is planning to sell a minority equity stake in its food subsidiary, overseas irrigation entity and piping unit. The process could help the company raise enough funds to repay lenders over time and manage its financial position better, the people cited earlier said.

For the quarter ended December 31, 2019, the company reported a net loss of Rs 183 crore compared with a net profit of Rs 63 crore a year ago. Revenue in the same period fell to Rs 352 crore, down 68 percent year-on-year.

Also Read: Can Jain Irrigation Emerge From This Debt Trap?

Jain Irrigation has 33 manufacturing bases with 11 manufacturing facilities and five demo and research development farms in India besides 17 plants located across four continents.