After Default, Altico Capital Seeks Additional Funding From Lenders

Altico Capital India Ltd., which defaulted on interest payments last week, has sought additional funding from its bankers so that it can continue disbursements to real estate projects it is financing.

The demand is part of a three-part resolution process, which includes asset-monetisation, restructuring of the existing loan book and fund infusion from new or existing shareholders. BloombergQuint has reviewed a copy of the resolution plan submitted to lenders.

Altico Capital is asking lenders to allow existing management to continue managing day-to-day operations. The management will actively monitor the non-banking financial company’s project portfolio to help preserve the value of assets, the presentation said.

The company plans to sell down exposure to some projects, while seeking additional funding from banks to keep lending to other projects going.

While the company’s default rates are currently low with gross non-performing assets at 1.8 percent, rating agencies have flagged the highly concentrated nature of the NBFC’s loan book. Altico Capital’s top 10 developer exposures account for 61 percent of the non-bank lenders’ book, according to India Ratings.

The company hopes to bring down some of these concentrated exposures.

As per the Reserve Bank of India’s stressed asset rules, lenders must sign an inter-creditor agreement to finalise a resolution plan for defaulting companies. In addition to this, the company has volunteered to set up a “Trust and Retention” account, so that lenders can appoint a cash management agency to manage all the cash flows of the company during the resolution process.

The final decision on any restructuring now lies with the company’s lenders.

Queries were sent to Altico Capital on Friday. Their responses are awaited.

On Sept. 12, Altico Capital defaulted on interest payments worth Rs 20 crore due on its external commercial borrowing from Dubai-based Mashreq Bank PSC. This eventually led to a series of cascading events and a downgrade to ‘D’, or default grade, by rating agencies.

The NBFC is backed by global private equity firms Clearwater Capital Partners, Abu Dhabi Investment Council and Varde Partners and has been under pressure due its exposure to the real estate sector.

Explaining the default, the company said that a lack of liquidity in the economy, after the collapse of the IL&FS Group in September 2018 and weakness in the real estate market, has led to an unfavorable environment.

In the days leading up to the default, Altico Capital said it received loan recall notices from its lenders worth around Rs 1,056 crore between Aug. 30 and Sept. 9. Around Rs 563 crore worth of loan recall notices were received after the default on Sept. 12.

“While the company tried addressing the cash flow mismatch through various refinance/monetisation efforts, the net effect of repayments adversely impacted the liquidity position of the company due to lack of any new financing,” it said.

In 2019-20 so far, the company repaid Rs 1,658 crore to its lenders and raised fresh borrowings worth Rs 447 crore. It also received Rs 400 crore from pre-payments and refinancing of its borrowers.

Altico Capital has scheduled repayments worth Rs 488 crore at the end of September, along with acceleration of facilities worth Rs 806 crore, it said.