Mumbai: In a relief to operational, unsecured creditors and provident funds, the IL-FS board has decided to revise the distribution framework for group resolution.The new board proposed to release 55 companies out of moratorium.
Some of these companies are under corporate insolvency process or facing liquidation and a few entities have limited business operations, the board told the National Company Law Appellate Tribunal (NCLAT).The new board proposed a mechanism for distribution of the financial bid amounts or liquidation amounts for considering the interest of each set of creditors.
After paying the distribution of net sale proceeds to creditors under the IBCs waterfall mechanism, the remaining amount will be distributed to each class of creditors on pro-rata basis.
Once approved, it will set a precedent for group resolution.Based on analysis of the current position of and challenges facing, the assessment of the New Board is that the revised distribution framework is a fair and equitable manner of distribution of the relevant sale proceeds and is in the best interest of all stakeholders and creditors across, the new Board said in a report to the NCLAT through the ministry of corporate affairs, a copy of which has been seen by ET.IL-FS defaulted on its debt obligations in August 2018, triggering a financial sector meltdown in India.
The government appointed board took over IL-FS in October 2018 and named Uday Kotak as the chairman of the board.
The board is addressing total outstanding debt of 94,000 crore.
Out of the total debt, ITNL, energy development arm IEDCL, IFIN and IL-FS together hold 48,000 crore.An IL-FS spokesperson declined to comment on the story.Provident funds of companies such as Philips India, SAS employee provident fund trust, British Airways Cabin Crew Pension Fund, PLC staff fund and superannuation fund are estimated to have invested 15,000 crore to 20,000 crore in IL-FS group entities.The distribution of proceeds from sale of wind energy is pending and will be based on the revised distribution framework.
Orix has bought seven special purpose vehicles from IL-FS for 5,920 crore.
The group has got interests in education business.Resolution through sale of wind, road and education is likely to fetch 18,000 crore.
The board is actively considering alternatives such as InvIT for value maximisation of assets with debt of 10,300 crore.
The company has received a binding bid for Chonqing Yuhe road asset, which has debt of 1,600 crore.
It is considering a Swiss challenge process for sale of technology, environment and BPO assets.
The board expects recovery of 3,000 crore to 3,500 crore through sale of real estate assets including the IL-FS headquarters in Bandra Kurla Complex.At a parent level, IL-FS took equity in roads, power companies and educational institutions that led to it promoting hundreds of companies.
Much of its debt is equity in operating companies, which would make it difficult to recover as other assets are yet to generate cash.Six entities are already under the corporate insolvency resolution process or CIRP.
Resolution has been passed for 7 entities, 8 of them are green entities with no debt and are under monetisation.
There are 6 entities which are trusts with no operations and 5 such companies with insignificant assets.The board observed that creditors are concerned about maximizing recovery at an individual entity level without regard to the adverse impact this would have on other creditors.