RBI debt restructuring scheme to benefit resilient sectors more: Crisil

Topics RBI | Debt recast | Crisil

Nearly two-thirds of the companies rated by Crisil would be eligible for a one-time debt restructuring.
Over 5,600 companies rated by rating agency Crisil across sectors will be eligible for a one-time corporate debt restructuring based on parameters proposed by K V Kamath Panel.

While the parameters for the scheme support debt restructuring across rating categories, the study (of over 8,500 entities) indicated that companies in resilient sectors like pharma, chemical, consumer durable\FMCG stand to benefit more. Three out of four rated ones in the resilient sectors will qualify for restructuring.

In the less-resilient sectors like auto dealerships, gems and jewellery, hotels, restaurants and tourism, and real estate, opportunities could be a little lower as they can take longer to recover to pre-pandemic business levels. Here, only one in three companies could be eligible for restructuring. Restructuring will also be available to a large number of companies that opted for the moratorium, CRISIL said in statement.

The Reserve Bank of India had set up panel headed by K V Kamath, former chairman ICICI Bank, to draw up sector-specific eligibility parameters for companies, which would enable restructuring of their bank loans. This scheme is for entities adversely affected by the Covid-19 pandemic.

The rating agency said it studied its rated portfolio of more than 8,500 companies after sorting them by rating, sector and moratorium availed. Nearly two-thirds of the companies rated by Crisil would be eligible for a one-time debt restructuring.

The broad-level assessment is based on financial projections and excludes small and medium enterprises (SMEs) and financial sector companies, CRISIL said in a statement.

Subodh Rai, senior director, CRISIL Ratings, said, "Three out of four investment-grade companies (rated CRISIL BBB- or higher) and one out of two in the BB rating category qualify for restructuring of bank loans. However, in the CRISIL B category, only one in three qualify because companies here tend to have relatively weak debt protection metrics. At an aggregate 
CRISIL portfolio level, two out of three companies were found eligible for restructuring.
While the qualification parameters have been defined in the framework laid out by the committee, lenders are also expected to use their discretion when assessing each restructuring proposal.

Rahul Guha, Director, CRISIL Ratings said the situation was still evolving. "The actual number of eligible companies could increase in case of favourable developments such as faster than expected turnaround of the economy," he said.

Banks choosing to convert interest charges to funded interest term loan or exploring other innovative ways of restructuring or promoters bringing in capital would be eligible for restructuring.
A final picture on how many companies have qualified for restructuring will only emerge over the next three- four months.”

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