The Hindu Business Line : IFCI asked to rework $100-m debt with lenders

THE Government has told the IFCI to try and re-negotiate with its lenders and investors the repayment of one of its foreign currency borrowings aggregating $100 million, due this month.

According to senior Government officials, considering the spate of loan restructuring exercises being carried out both worldwide and closer home by corporates and bankers, the IFCI should also attempt a similar exercise. The troubled financial institution has requested the Finance Ministry to provide a sovereign guarantee to enable it to redeem its floating rate notes (FRNs) aggregating $100 million.

The Ministry is of the view that IFCI should try to negotiate with overseas banks and investors to the $100 million FRNs including the prospect of rolling over the borrowings. A few Indian corporates, which faced problems in fulfilling their FRN repayment obligations in the last year or two, managed to restructure their debt payments.

With the redemption date just two weeks away, the chances of restructuring these overseas borrowings, however, appear tough. The Finance Ministry has already indicated that the Government would provide a guarantee to IFCI as it does not want a default on a quasi-sovereign borrowing.

The guarantee proposal is now awaiting the approval of the Finance Minister, Mr Jaswant Singh. Officials here said that as in the case of the previous guarantee the Government would impose a couple of conditions. One of which is that the Government will have the first charge on future revenue or income streams of the institution. This is to ensure that the guarantee is not invoked later.

In August this year, the Government supported IFCI with a guarantee to help it to borrow afresh for repayment of a $100 million FRN offering and Rs 300 crore of local currency borrowings. The IFCI's request was higher as it wanted the Government to provide a guarantee to meet its repayment obligations aggregating Rs 1,800 crore during October and November.

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