India

Mumbai-based rating agency Crisil has sharply increased its estimate of restructured bank loans for this financial year, raising fresh concerns about the asset quality of banks, The Wall Street Journal Real Time India blog reported. Crisil estimates that the total loans to be restructured in this fiscal year will be 3.25 trillion rupees ($58.41 billion) compared to their earlier estimate of 2 trillion rupees. The rating agency said the revision is mainly because of the financial stress faced by state power companies and infrastructure sector.

Indian drugmaker Wockhardt is proving there is life after debt restructuring. After defaulting on $110 million in overseas bonds in 2009 and renegotiating payment on 13 billion rupees in loans, the generics maker is nearly free from a sometimes bitter process of debt recast and is enjoying a furious stock rally, Reuters reported. While Wockhardt's imminent emergence from India's corporate debt restructuring (CDR) system is widely seen as a turnaround success, it comes as the central bank pushes for tighter rules around the process as more companies take advantage of it.

A light is shining at the end of the tunnel for Indian telecom tower company GTL Infrastructure. After a drawn-out restructuring process, GTL is close to finalizing a cashless exchange offer with holders of its US$228.3m foreign currency convertible bonds, Reuters reported on an International Financing Review story. Bondholders have approved a restructuring proposal tabled by GTL's advisers Houlihan Lokey and Avista Advisory, leaving a resolution likely before mid-September if the Reserve Bank of India approves it.

Higher loan-loss provisions by banks and greater "sacrifice" by founders or controlling shareholders of troubled companies are among the tighter norms for loan restructuring recommended by a panel appointed by India's central bank, Reuters reported. Banks should set aside 5 percent of total assets for standard loans that are restructured, up from 2 percent currently, while provisions for loans that are already restructured should be increased to 5 percent in a phased manner over two years, the report said.

As India's growth rate fades, its banking system is developing bad habits. Debt restructurings are on the rise. And Indian banks have the lowest bad debt reserves in the Asia-Pacific region, Reuters reported. Without an improvement, the pressure to fudge the numbers will only increase. The Reserve Bank of India's Financial Stability report, released on June 29, said that banks remain comfortably capitalised, but the central bank is concerned about the deteriorating quality of the banks' loan books.

Lenders to Hotel Leela, a 5-star chain that is more than two months behind in payments on $700 million of debt, are likely to bite the bullet and amend the loan terms rather than declare it in default, say bankers involved in the talks, Reuters reported. Restructuring corporate loans - allowing banks to dilute payment terms without classifying loans as bad - is on the rise in Asia's third-largest economy, providing a lifeline to borrowers struggling in a sharp economic slowdown, but piling more stress on bank balance sheets.

A massive restructuring of debt in India's ailing textile sector will likely provide relief to thousands of mills struggling with losses and revive demand for cotton in the world's second-largest producer, industry officials said Wednesday, The Wall Street Journal reported.

India's mounting economic and political woes are prompting market players to raise the specter of a Greek-style crisis in Asia's third largest economy, Reuters reported on an International Financing Review story. This is not simply idle speculation. Last Friday, the rupee crashed to an all-time low against the dollar of 54.9 and it was stuck most of Tuesday at the psychologically significant Rs55/USD level, where the currency is seen as having no obvious technical support. And the implications of a rupee collapse would be immense.

Indian banks Monday discussed proposed changes to the corporate debt restructuring mechanism to minimize their losses and ensure that founders of stressed companies have skin in the game, the Deal Journal India blog reported. The mechanism is a formal process aimed at achieving an agreement between a stressed company’s lenders to restructure its debt. The proposals ranged from asking founders to issue personal guarantees and pledging entire holdings to requiring stressed companies to give creditors seats on their boards, said R.K. Dubey, executive director at Central Bank of India. Mr.

Singapore's privately held PhillipCapital Group said on Wednesday it has agreed to buy a majority stake in defunct broker MF Global's Indian unit, Reuters reported. PhillipCapital, which runs brokerage and asset management business across 13 countries, said it would plan to rename the business Phillip Securities India. No financial terms of the deal were disclosed and the transaction is still subject to regulatory approval. PhillipCapital said it will buy a majority stake in the joint venture between Sify Technologies and MF Global and has also agreed to buy the rest of the bankrupt U.S.