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Friday, January 13, 2012

SBI caps losing its hold on debt restructuring business

MUMBAI: SBI Capital Markets, the undisputed leader in loan syndication as well as debt recast, is slowly losing its grip in the market. Unlike in the past, lenders in the domestic market are no longer signing on the dotted lines if a loan is syndicated or restructured by SBI Caps, the investment banking arm of State Bank of India.

A number of bankers on condition of anonymity say they are no longer comfortable if a proposal is attached to SBI Caps and that they would prefer to vet it themselves -a far cry from the days when SBI Caps' project-appraisal skill was perceived to be impeccable.

A perceived failure in a series of restructured cases like GTL, Air India and Kingfisher added to the growing feeling in the market that SBI Caps is driven more by the fees it earns on advisory than being fair to all lenders in the consortium SBI Caps did not comment to a mail sent by ET on the matter.

The classic case is that of GTL. In June 2010, SBI Caps syndicated a Rs 5,000-crore loan for GTL Infra to pay for Aircel Cellular's tower business. One of the key responsibilities of a loan syndicator is to convince lenders that they have appraised the company and that the company is worth investing in.

However, a year after the loan syndication, SBI Caps was back in the picture to help GTL Infra in a financial crisis. "SBI Capital would suggest appropriate steps or remedies required to protect lenders' interest," the company had then said in a notice to the exchange.

In September 2011, GTL Infra had to go for corporate debt restructuring, with SBI Caps as its advisor. This annoyed lenders who felt SBI Caps did not do its homework before approaching them for investment in GTL. Further, they were disappointed with the CDR package itself, which proposed that lenders would convert 25% of the Rs 16,200-crore debt into equity, while the promoters would infuse only Rs 300 crore.

Similar was the case with Kingfisher Airlines. SBI Caps restructured the loan in May 2010 under a one-time dispensation given by banking regulator Reserve Bank of India. Bankers are now questioning SBI Caps' credibility in assessing the financials of companies, as it has now gone back to banks for another round of restructuring.

"In the past, the restructuring exercise used to be a collaborative effort where lenders took a very practical approach. That does not seem to be the case now," said a senior executive from an asset restructuring company. Willy-nilly, lenders gave their nod to the recasting of GTL's debt and are eagerly waiting for SBI Caps' viability report on Kingfisher.

However, they have rejected the Air India recast package, again designed by SBI Caps. Here the tension between the lenders and SBI Caps was evident as they rejected the proposal saying the provisioning requirement is much higher for all lenders except for SBI.

SBI Caps had proposed conversion of a part of the debt into preferential shares, which involved huge amount of provisioning. "SBI Caps is becoming a darling among companies that are under stress and approaching CDR.

Source: EconomicTimes


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