BQ: Operational Creditors Recover 42% Of Claims Under IBC, Says ICRA

19 June 2019: Rating agency ICRA Ltd. said operational creditors recovered 42 percent of their total admitted claims from 92 debt-ridden companies under the bankruptcy law as of March.

They took a haircut of 58 percent on the total claims of around Rs 8,140 crore, the rating agency said in a report. In comparison, financial creditors realised 44 percent of their total claims worth Rs 1.6 lakh crore for the 92 corporate insolvency resolution processes that yielded a resolution plan in 2018-19.

The rating agency said haircuts for operational creditors are in line with financial creditors.

Abhishek Dafria, vice president and co-head (corporate ratings) at ICRA, said operational creditors haven’t suffered significantly larger haircuts because they play a critical role in the core operators of the corporate debtor, that is undergoing insolvency proceedings. “As a result, the resolution applicants have ensured that relationships with such creditors are maintained,” he said in a media statement.

Since operational creditors are not a part of the committee of creditors—in-charge of evaluating resolution plans—it’s the responsibility of the financial creditors to ensure that the operational creditors receive a fair share of their claims, Dafria said. “A short-sighted vision of the financial creditors to enhance their own realisation from the resolution applicant could impact the sustainability of the businesses of the operational creditors, which would thus have a bearing on the going concern status of the corporate debtor itself in the long run.”

Cases Admitted Under IBC

  • Nearly half of the 1,858 cases admitted by the National Company Law Tribunal under the Insolvency and Bankruptcy Code have been referred by operational creditors as of March, ICRA said.
  • Of the 1,858 cases, the tribunal ordered liquidation in 278, while there are pending reviews or appeals in 152 corporate insolvency resolution processes as of March.
  • According to the Insolvency and Bankruptcy Board of India data, 94 resolution plans were approved by lenders as of March, while 91 cases were withdrawn under Section 12A of the IBC.
  • Around 362 cases out of the 1,143 ongoing corporate insolvency resolution processes have gone past the prescribed 270-day timeline as per the IBC, while 186 cases are between the 180-day and 270-day extended timeline limit.

The BloombergQuint reported



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