Lenders yet to discuss liquidity crisis
Despite crisis coming to a head at the IL&FS group, lenders are yet to meet collectively to take stock of the situation and take steps to limit the damage.
Central Bank of India is the lead banker to Infrastructure Leasing & Financial Services (IL&FS) Ltd, the holding company of the IL&FS group.
The gross debt of IL&FS Ltd stood at ~910 billion.
IL&FS on September 10 defaulted on a repayment of ~1 billion to Small Industries Development Bank of India (SIDBI, not rated). This came after a series of defaults starting on August 28, when IL&FS Financial Services, one of its US-based PE fund Blackstone is in talks with cash-strapped IL&FS to buy the latter's head office building in Bandra Kurla Complex in Mumbai, sources said. Though the talks are in preliminary stages, the 400,000-sq ft building could fetch anywhere between ~14 and 15 billion, given the rates in the area, sources said. Blackstone refused comment on the development. main subsidiaries, delayed meeting some commercial paper obligations.
A senior executive (corporate banking) of a private bank said each lender was reviewing its exposure to entities in the crisis-hit group. However, no collective decision making has happened to date.
A board member of a public sector bank said no joint meeting of lenders had happened.
IL&FS is playing roles of a holding company, a project developer and a financier.
As of March 31, debts incurred by IL&FS in the form of bank loans accounted for 0.5-0.7 per cent of the overall loans of banks.
“We do not expect the exposure of any rated bank to exceed 2 per cent of its loan book,” rating agency Moody’s said, adding the main shareholders of the group had a strong financial standing. However, so far, there has been no publicly declared commitment of specific support from the main shareholders.
Sounding a warning on the liquidity crisis at the IL&FS group, Moody's said it was credit-negative for banks and the debt market in India. The defaults would affect mutual funds, pension funds and insurance companies.
Life Insurance Corporation, Orix Corporation of Japan, State Bank of India (SBI) and Central Bank of India are among key shareholders of IL&FS.
SBI and Central Bank of India have a dual role as lender and shareholder. SBI has a representation on the board of IL&FS.