IL&FS defaults again, on ICDs

Beleaguered infrastructure financier Infrastructure Leasing & Financial Services (IL&FS) has defaulted on interest and principal payments on intercorporate deposits (ICDs) of ~1.72 billion due last Friday.

In a statement to the stock exchanges, IL&FS said the interest default by the company on September 29 was set off by IndusInd Bank towards interest for ~164 million against interest service reserve account maintained by the company with IndusInd Bank. “The liability of IL&FS thus stands cancelled to that extent for IndusInd Bank for the month of September 2018,” it said.

In June this year, IndusInd Bank had signed a definitive share purchase agreement with IL&FS to acquire IL&FS Securities Services (ISSL). In the last week of September, IndusInd announced that it had received all regulatory approvals to take over ISSL. The closure of the deal is underway, the statement said.

Analysts have said these asset sales will help reduce overall debt of the company, but the sale proceeds would go to the banks that are holding charge on assets. IL&FS had a consolidated debt of ~910 billion as in March this year.

“Asset sales like the expected sale of IISL to IndusInd Bank for ~15 billion may solve some issues but is unlikely to bring in new cash into the company as these assets may be pledged for borrowings. IndusInd Bank has an unsecured loan of ~7.5 billion to Chenani-Nashri Tunnelway special purpose vehicle (SPV), and there are chances that the shares of IISL may already be pledged to lenders. The company has not provided any information on asset pledges,” distressed debt specialist firm, REDD Intelligence, said in a report dated September 27.

The research firm said the secured loans at the parent level of IL&FS are less secure than previous estimates.