IL&FS lenders looking at a 10-15% haircut; BoI, SBI, PNB & Yes Bank staring at a hit: Report

Lenders to the beleaguered IL&FS group are looking at a 10-15 percent haircut in many of its projects as buyers will bargain hard, The Economic Times reports. A group of banks, led by Bank of India (BoI) and State Bank of India (SBI), have lent IL&FS Rs 34,480 crore, which is a part of its consolidated debt of Rs 91,000 crore.

BoI has the highest exposure to the debt-ridden firm with loans of Rs 2,388 crore, followed by SBI at Rs 2,140 crore and Punjab National Bank at Rs 1,859 crore. Yes Bank has the largest exposure within private sector banks, with loans worth Rs 1,841 crore, as per a Kotak Institutional Equities report.

Experts believe the Centre’s decision to overhaul the company’s board and appoint a new, six-member team led by Uday Kotak, has improved the lenders’ chances of recuperating their money, but haircuts are unavoidable, the report said.

The loans will be restructured and the asset monetisation process will lead to a delay in payments, Abizer Diwanji, Partner, Financial Services at EY, told the paper. “You also have to consider the mark-to-market losses on these loans. It is fair to assume some haircuts for lenders in the short term,” he added.

The National Company Law Tribunal (NCLT) has ordered the newly-formed board to meet on or before October 8. The board is yet to come up with a financial plan which will include monetising some assets and restructuring loans.

A banker with a UK-based bank which has an exposure of about Rs 200 crore told the paper that they are confident of recovery, now that the government has stepped it. They also deemed it premature to assume a haircut at present as government intervention has boosted creditor confidence.

Others in the banking industry said open projects on the ground which can be monetised give the lenders confidence. Calling it a short term liquidity issue, bankers think this problem can be resolved through capital infusion and loans by government-backed entities. Also, there are many interested parties for IL&FS’ roads, power and energy-linked projects.

“Once the liquidity issue is resolved, the board will get more time and they can take a few months to a year to offload some projects,” a banking official told the paper.