Lenders To Reliance’s Mumbai Metro Accept Debt Restructuring Plan
The plan, structured by consulting firm EY, is in the final stages of approval.
A consortium of lenders, led by Syndicate Bank, is set to agree to a restructuring scheme for Reliance Infrastructure Ltd.’s Mumbai Metro project, two people in the know told BloombergQuint on condition of anonymity.
The restructuring plan involves extending the tenure of the Rs 2,200 crore in outstanding loans by two years, the people quoted above said. In addition, lenders will likely agree to a cut in interest rates to around 9 percent from over 11 percent currently, which will help the metro project repay its dues on time, the people said.
The plan, structured by consulting firm EY, is in the final stages of approvals, with individual lenders seeking board approvals to move forward with the restructuring plan. Apart from Syndicate Bank, other lenders to the project include IDBI Bank, State Bank of India, Indian Bank, Bank of Maharashtra and India Infrastructure Finance Company (UK).
An MMOPL spokesperson said, “At present, resolution process of MMOPL is underway and Inter-Creditor Agreement has been signed amongst its lenders.”
Lenders to the project had signed an inter-creditor agreement in June, after the Reserve Bank of India released fresh guidelines on restructuring stressed accounts. The consortium had appointed BDO India as adviser to look at the viability of the restructuring plan, the first of the two people quoted earlier said. The study has not thrown up any negative surprises yet, this person said.
“Due to client confidentiality and sensitivity of these assignments, we will not be able to comment on the queries,” said a BDO India spokesperson in response to queries emailed on Monday.
Queries emailed to EY on the same day remained unanswered as of publishing this story. Mrutyunjay Mahapatra, managing director and chief executive officer at Syndicate Bank, declined to comment on the story.
Reliance Infrastructure owns 69 percent stake in Mumbai Metro One Pvt. Ltd., the entity that manages the metro project. Mumbai Metropolitan Region Development Authority owns 26 percent, while Veolia Transport RAPT Asia holds the remaining 5 percent stake.
The metro rail project, which extends over 12 kilometers and covers 12 stations, has seen stress build up over time. While the company has been able to cover its maintenance cost, it is has not been able to generate enough revenue to repay its debt on time. MMOPL has also been fighting a case at the Bombay High Court against a reduction in fares proposed by a fare fixation committee, which includes government representatives.
The company had previously attempted to restructure its debt under the scheme for sustainable structuring of stressed assets (S4A) of the RBI, in the second half of 2017. However, the plan did not receive requisite approvals from the lenders. Soon after that, the banking regulator scrapped the restructuring scheme altogether.
The Anil Ambani-owned Reliance Group has seen many of its companies undergo debt restructuring, owing to high debt and low profitability. This includes Reliance Infrastructure, which is the parent company of the metro project.
Reliance Infrastructure has already announced that its lenders have signed an inter-creditor agreement to restructure its debt. Reliance Power Ltd. too is under the RBI’s restructuring framework. Reliance Communications Ltd, meanwhile, has already been admitted for insolvency proceedings, where lenders have claimed over Rs 49,000 crore worth dues.