APAC: Court blocks IL&FS asset sale plan

21 September 2018 - 12:00 am UTC

Troubled concession group IL&FS Transportation Networks Ltd’s (ITNL)’s asset sale plan has hit a roadblock after a court restrained the company from selling assets. 

Aditya Birla Finance Ltd., one of the creditors of two ITNL project special purpose vehicles, approached the Delhi High Court to recover its dues from company which had total liabilities of INR 1trn (USD 13.8bn) as of 31 March.

ITNL said in an exchange filing on Friday (21 September) that the court had on 18 September ordered it against “transferring or creating third party interest in their unencumbered assets till the next date of hearing” which will be on 7 December, 

The group, which is the transportation unit of Abu Dhabi Investment Authority-backed IL&FS Group and one of India’s largest PPP companies, said it “is seeking legal advice to defend the aforementioned interim order and take appropriate steps,” the filing added. 

ITNL is in advanced discussion with I Squared Capital’s Cube Highways, India’s National Investment and Infrastructure Fund and Lone Star Funds to sell a stake in seven operational road assets.

The asset sale program is an important part of ITNL’s plan to meet its consolidated debt obligations.  According to its latest annual report published last month, IL&FS Group had borrowings of INR 910bn as of the financial year ending March 2018 including maturities of long-term borrowings of INR 122bn. This was up from INR 800bn the previous year.

On Saturday ITNL announced that its CFO Dilip Bhatia relinquished his position to focus on the divestment as chief strategy officer. The group told the markets the move had been made “considering the strategic priority of monetization of the company’s project assets and generating liquidity”.

A senior ITNL official earlier confirmed the company will have to seek the court’s permission if a deal happens. He declined to comment on the amount of loan due to Aditya Birla Finance. 

“The court’s order can open a Pandora’s box for ITNL,” a banker said. Other creditors may approach courts for recovery of their dues, he added.   

ITNL’s parent IL&FS group has called for a board meeting on 29September to seek shareholders nod to raise funds and seek approval for the asset sale. 

Inframation has learnt the shareholders may seek a debt resolution plan before committing to pump in more money into the beleaguered group.

IL&FS Group has 169 subsidiaries, associates and joint ventures, as per its latest annual report. 

India’s biggest insurer Life Insurance Corporation of India owns a 25.3% stake in IL&FS. It next largest shareholders are Japan’s Orix Corporation (23.5%); Abu Dhabi Investment Authority (ADIA, 12.56%), Housing Development Finance Corp (9%), Central Bank of India (7.67%) and State Bank of India (6.4%).

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