The board of debt laden Infrastructure Leasing & Financial Services (IL&FS) has approved a proposal enabling interim distribution of proceeds to the extent of Rs 20,000 crore by March end (2022) to creditors of the group from the resolution of the entities of the group. An affidavit has been filed with National Company Law Appellate Tribunal (NCLAT) by the government on behalf of IL&FS to permit and approve the interim distribution mechanism, post which the proceeds can be transferred to the creditors.
“On approval, this will allow interim distribution of over Rs 20,000 crore in cash and InvIT units – without waiting for final resolution”, an IL&FS spokesperson said.
“Subject to the relevant group entities being transferred to the InvIT by 31.03.2021 and other ongoing resolution processes being completed in a timely manner, the tentative amount intended to be distributed by way of interim distribution as on 31.03.2022 is approximately Rs 16,200 crore i.e., Rs 10,950 crore of cash and Rs 5,250 crore of InvIT units)”, the affidavit stated.
The decision of interim distribution of proceeds was taken because the group is expected to have a considerable amount of distributable assets, both in the form of cash and infrastructure investment trust (InvIT) units, by March. Also, despite a significant amount of debt being addressed, debt of majority of the creditors has not been settled since the group went bust in 2018, except in case of category II entities, where the financial bid amount offered by the successful bidder was less than the liabilities of the entities.
Further, if the appellate tribunal accepts the interim distribution mechanism, it will ensure that creditors, including public fund creditors, will get proceeds which they have been waiting for since 2018. A significant amount of external fund based debt was availed by the group from entities such as pension funds, employees welfare fund, army group insurance funds, provident funds, and many other such funds clubbed under the public fund creditors.
As of December 2021, the total amount received by creditors is Rs 7,000 crore. Green entities have been paying their creditors through regular debt servicing also certain creditors have recovered certain amounts from Red and Amber entities through forceful auto-debits.
In an affidavit to the NCLAT, the board of IL&FS has said that by end March 2022, around 249 group entities will be resolved and by way of sale, liquidation, or transfer to InvIT in exchange of InvIT units and approximately Rs 21,300 crore of assets (cash and InvIT units) will be available with various IL&FS group entities. As of January 7, around Rs 16,742 crore of cash was available with various group entities.
Further, the group has informed the appellate tribunal that as of January 31, 191 group entities have been resolved. The board had earlier stated that it plans to resolve around Rs 55,000 crore worth of debt of the group by end March 2022, which is more than 90 per cent of the overall estimated resolution value of Rs 61,000 crore. “Given the complexities involved in resolving the remaining IL&FS group entities, having an estimated resolution value of Rs 6,000 crore, it is expected that the process will take significant time”, the affidavit stated.
The board of debt laden IL&FS until recently had resolved Rs 52,000 crore worth of the debt of the group. Further, it had maintained its projection of resolving approximately Rs 61,000 crore worth of the debt of the overall group. IL&FS went bust in 2018 with a debt of close to Rs 1 trillion.