In a major relief to pensioners, the National Company Law Appellate Tribunal (NCLAT) has ruled that the provident and pension funds which have put in their money in Infrastructure Leasing & Financial Services (IL&FS) would be given priority in repayment among all categories of companies, classified under green, amber or red. The Uday Kotak led new board has allowed the companies classified under the green category to service their loan to all secured and unsecured creditors. Meanwhile, the loans under the amber category had been allowed to service debts of only senior secured creditors.
Financial daily Business Standard reported that the NCLAT in its last hearing had said that IL&FS subsidiaries under amber must be reclassified into the green category. On non-compliance, the appellate tribunal threatened to pass the orders asking such companies to fulfil 100 per cent debt obligations of the provident and pension funds. The new IL&FS management informed the tribunal that it had reclassified 13 companies under the amber category which included Jharkhand Road Projects & Implementation Company (JRPIL), Moradabad Bareilly Expressway and West Gujarat Expressway (WGEL).
The move of suspending debt repayment has provided Birla Sun Life Mutual Fund (MF), one of the major fund houses affected by IL&FS entities'. A Balasubramanian, chief executive officer of Birla Sun Life MF said, "JRPIL was one of our major exposures in IL&FS, at around Rs 890 crore. The exposure was spread across our medium-term plan, credit risk fund and dynamic bond fund. 'Green' classification will make this a standard asset as the debt servicing will resume. JRPIL was a good asset as the money was coming into the special purpose vehicle's escrow account."
The counsel of new management assured the NCLAT that the remaining companies would also be reclassified under green category over time. The next hearing of the case will be held on August 8th. After assuming charges the new board of IL&FS is taking a slew of measures to cut down on debts. Basis their financial health and ability to repay its debts to secured and unsecured creditors, the board classified IL&FS group companies into three categories — green, amber, and red.