Banks invoke S4A scheme to recast Soma Enterprise’s debt
Mumbai: Lenders to Soma Enterprise Ltd have invoked the scheme for sustainable structuring of stressed assets (S4A) to recast its debt, according to two people familiar with the matter.
According to the plan, Soma’s debt will be split equally into sustainable debt and unsustainable debt, according to two persons aware of the matter.
Under S4A, a defaulter’s debt is classified into sustainable and unsustainable parts. The former is left alone to perform or be restructured if necessary, while the unsustainable debt would be converted into equity or equity-like, long-dated securities and redeemed at a later date.
UCO Bank, Axis Bank, Andhra Bank, State Bank of India (SBI), Bank of Baroda, IDBI Bank, are among the 23 lenders to this Hyderabad-based company. At the end of March 2016, Soma had a consolidated debt of Rs4,658 crore.
The Reserve Bank of India-mandated oversight committee (OC), which includes former Securities and Exchange Board of India (Sebi) whole-time director S. Raman and former SBI chairman Janaki Vallabh, approved the recast proposal earlier this month.
In June, Reserve Bank of India had expanded the OC to approve stressed cases under the central bank’s S4A as well as for resolving stressed cases where the aggregate exposure of the banking industry is above Rs500 crore.
Soma is the first account from the second list of bad loans identified by the RBI to be resolved outside the National Company Law Tribunal (NCLT) before 13 December.
Majority of other accounts in the second list are likely to be referred to the NCLT. After recommending 12 corporate defaulters in June for insolvency proceedings, RBI had identified 29 more cases for restructuring before 13 December, failing which they had to be referred to NCLT. Some of the names in the second list include Uttam Galva Steel Ltd, Videocon Industries Ltd, Soma Enterprise.
Soma narrowed its loss to Rs26 crore in the year ended 31 March 2016 from Rs255 crore in the previous year. Total revenue rose to Rs2,073 crore and interest expenses increased to Rs470 crore during FY16. The company’s debt was once restructured under the corporate debt restructuring cell in 2013. The Hyderabad-based engineering, procurement and construction (EPC) business had taken a hit due to stalled road projects.