Secured Lenders Reject IL&FS Jammu Tunnel Debt Overhaul Plan

Secured lenders led by the State Bank of India have rejected a debt overhaul plan submitted by IL&FS for a project it is undertaking in Jammu and Kashmir to build India’s longest tunnel, three say people familiar with the development. Secured lenders say the distribution of cash as proposed under the plan was unfair and biased in favor of creditors and unsecured lenders within the IL&FS group, they said.

Last December, IL&FS offered a debt overhaul for Chenani Nashri Tunnelway Ltd (CTNL), after a 3,900 crore deal to sell the special purpose vehicle to I Squared Capital’s Cube Highways fell through. , the people said. IL&FS wanted Cube to improve the offer after the deal was signed, they said.

IL&FS has proposed that CNTL’s debt be transferred to an infrastructure investment trust at Rs 5,257 crore – the revised value according to an RBSA valuation report. The secured lenders requested a higher share of the proceeds on the grounds that CNTL’s enterprise value improved between mid-October 2018 – when the moratorium was imposed – and March 2021, mainly due to a balance cash of Rs 1,500 crore in the SPV which was the payment due to them but was not distributed due to a moratorium imposed during the collapse of IL&FS.

IL&FS did not respond to a request for comment until press time Friday.

In a series of meetings, the secured lenders communicated to IL&FS that the cash balance of Rs1,500 crore should be distributed among them in accordance with the cascading mechanism approved by the Appeal Tribunal for the settlement of corporate debt. related to IL&FS. However, IL&FS has offered to distribute Rs 1,500 crore to all categories of lenders – secured, unsecured and IL&FS group lenders, one of the people said.

The IL&FS group will benefit if the money is distributed to all classes of lenders since their share of CNTL’s debt is 24%, the person said.

The company has an outstanding debt of Rs 5,454 crore with 28 lenders. Of this amount, the share of secured creditors is Rs 2,806 crore. He owes Rs 1,353 crore to unsecured creditors, while borrowing from IL&FS group companies stands at Rs 1,295 crore.

IL&FS proposed October 15, 2018 as the deadline for admitting claim amounts and implementing the restructuring effective March 31, 2022. It also suggested that all lenders receive 7.5% interest at from April 2021 and that the loan will be repaid over 10 years ending in March 2031. Objecting to this, secured lenders say that the interest component on the loan should be from the date of admission of complaints. This IL&FS plan essentially involves secured lenders sacrificing the interest component from mid-October 2019 to March 31, 2021, even when the business has an adequate cash balance, the second person said.

The Chenani-Nashri Tunnel, now renamed Dr Syama Prasad Mookerjee Tunnel, is the longest in India at 9.28 km and is located on National Highway 44. It cuts the distance between Jammu and Kashmir by 30 km.

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