Debt-laden IL&FS Calls Emergency Board Meeting for Raising Funds
Moneylife Digital Team 07 September 2018
Infrastructure Leasing & Financial Services (IL&FS), the an unlisted infrastructure behemoth with scores of complex subsidiaries, some of which are listed and a giant load of debt, has called an emergency meeting of its board of directors for raising funds. The financial services conglomerate, with around Rs1-lakh-crore public debt, is gasping for liquidity after failing to meet certain repayment obligations and triggering fears of loan recalls, says a report from Times of India.
 
"The emergency meeting is expected to convey the intensifying crisis at IL&FS to all the main shareholders and also possibly expedite a proposed Rs4,500-crore rights issue, which is scheduled for early November. On the positive side, all prominent shareholders - Life Insurance Corp of India (LIC), Orix of Japan, State Bank of India (SBI), Abu Dhabi Investment Authority and HDFC - have agreed in principle to participate in the rights issue," the report says. 
 
Other report from Business Standard says the board will take a call on fundraising, sale of assets, including road projects, and default by its subsidiary IL&FS Financial Services (IFIN) on commercial paper. 
 
Last month, IL&FS Financial Services has failed to meet its repayment obligations through a commercial paper. Due to this, Reserve Bank of India (RBI) barred the group company from raisng short-term funds through commercial paper route till 2019.
 
Ratings agencies have downgraded the debt of IL&FS Transportation Networks Ltdd and two other entities in the road sector are struggling to make payments on time. There are also reports about delayed salaries in its toll company and ILFS Environmental Infrastructure and Services Ltd. Several fund raising plans have also failed. 
 
As reported by Moneylife, IL&FS has reportedly defaulted on a short-term loan worth hundreds of crores from Small Industries Development Bank of India (SIDBI). According to our sources, IL&FS has defaulted in repaying a short-term loan of Rs1,000 crore to SIDBI. At the same time, a subsidiary of IL&FS too has defaulted in repaying loan worth about Rs500 crore to the development financial institution.
 
Defaulting on short-term loan commitment that too from an infrastructure development and finance company with pan-India presence, is very serious issue. Nothing of this sort has happened before, our source says.
 
Separately, last week, ratings agency ICRA has downgraded to 'D' from 'C' bank debt of Rapid Metrorail Gurgaon South Ltd (RMGSL) for not making interest payment for August 2018 on time. RMGSL is a special purpose vehicle (SPV) sponsored by IL&FS Rail Ltd (IRL) with 65.0% stake and IL&FS Transportation Networks Ltd (ITNL) with balance stake.
 
"The revision of RMGSL's rating takes into account the recent irregularities in debt servicing by the company. RMGSL has not paid the interest for the month of August 2018. The company's inability to generate sufficient revenues due to continued weak ridership on the project route had made it highly dependent on timely funding support from promoters. However, the promoter has not made available the required funds. As per the RMGSL's management, the company has represented to Haryana Urban Development Authority (HUDA) for claims due to breach of provisions of the Concession Agreement," ICRA has said.
 
Total cost of the project was funded by a combination of debt of Rs1,500 crore and equity. The entire term loan of Rs1,500 crore has been sanctioned by a consortium of five banks with Canara Bank as the lead bank and an external commercial borrowing (ECB) loan lender. The project achieved commercial operations on 31 March 2017.  
 
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