Lenders to Indian Textile Firm Reject $1 Billion Revamp Plan
Sintex sought higher haircut than banks were willing to offer. Lenders to refer firm to bankruptcy to avoid higher provisions.
(Bloomberg) -- Lenders to Sintex Industries Ltd. rejected a debt restructuring plan by the company and intend to push it into bankruptcy, people familiar with the matter said.
According to the resolution proposal, the Indian textile company will be able to service only 30% of its 63 billion rupees ($888 million) of bank loans, the people said, asking not to be named, as the information isn’t public. The plan also included infusion of about 2 billion rupees into Sintex by two other yarn producers, the people said.
Indian banks, saddled with the world’s worst bad-loan ratio, have been struggling to recover money from delinquent borrowers amid a prolonged credit crunch and weakening economic growth. Though banks have been increasingly pushing more cases to bankruptcy, only 15% of cases admitted to the insolvency courts have been closed through a resolution plan.
Banks to the company, led by Punjab National Bank, were expecting at least 50% recovery on the loans and higher cash infusion, the people said. As the loans are already classified as soured, they will need to push the company into bankruptcy by Jan. 3, failing which an additional 20% provisions have to be set aside for the loan, the people said.
Representatives of Sintex and Punjab National Bank didn’t immediately respond to emails and phone calls seeking comment.
Care Ratings Ltd. and Brickwork Ratings Ltd. had cut the ratings of Sintex Industries to default in June, citing delays in repaying bank loans and debentures. The company had reported net losses for the last three quarters, exchange filings show.
--With assistance from P R Sanjai.
To contact the reporter on this story: Suvashree Ghosh in Mumbai at sghosh186@bloomberg.net
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Anto Antony, Jeanette Rodrigues
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