Lenders to real estate financier Altico Capital India Ltd. are looking at alternative restructuring options after talks with foreign funds such as Apollo Global Management LLC and Cerberus Capital Management LP fell through, according to two people with direct knowledge of the discussions.
The value being offered by these two foreign funds was too low for the banks to move ahead with the talks, the people said on condition of anonymity. While Apollo Global offered to take over the loan exposure at an 85 percent discount, Cerebrus Capital offered a slightly better 75 percent discount, the people quoted earlier said. The lenders to the real estate non-bank lender declined both the offers, as these would require steep haircuts on their Rs 4,300-crore exposure to the non-banking financial company.
Lenders to Altico Capital include banks, mutual funds and bondholders. The NBFC has a loan book of around Rs 7,000 crore.
The funds, after their initial due diligence, surmised that the real estate market in India is stressed enough for Altico Capital to recover around 40-50 percent of its loan book. Apart from settling with lenders to buy their outstanding loans, the funds would also need to infuse additional capital into the NBFC for it to restart operations. This would bring the effective rate of return on their investments to around 20 percent, according to the people quoted earlier.
The lenders led by State Bank of India are looking to appoint SBI Capital Markets to create a resolution plan for Altico Capital, the people said. Lenders are hoping that SBI Caps will arrive at a more optimistic assessment of Altico Capital's current financial profile, allowing for lower haircuts, they added.
Apollo Global and Cerberus Capital declined to comment on BloombergQuint's queries, while SBI, SBI Caps and Altico Capital are yet to respond.
The NBFC is backed by global private equity firms Clearwater Capital Partners, Abu Dhabi Investment Council and Varde Partners and has been under pressure due its exposure to the real estate sector. The top 10 borrowers of Altico Capital account for more than 60 percent of its loan book.
Watch | Altico's lenders look at new restructuring options.
Both Apollo Global and Cerberus Capital had sought to participate in the resolution process for Altico Capital after the NBFC fell into liquidity stress last month.
While the funds were holding talks with the company and its investors, Altico Capital defaulted on Rs 20 crore worth dues to Mashreq Bank. Rating agencies such as India Ratings and Research Pvt. Ltd. and CARE Ratings had also downgraded the NBFC's long-term debt. Spurred by this, the lenders to the NBFC got together to resolve the stress in the company. Subsequently, the funds decided to hold direct talks with the lenders.
Now that initial offers have been declined, the lenders to Altico Capital are clear that they would not be conducting further negotiations with the funds. The lenders may look at other options such as providing additional funds to the company and appointing new management, the first of the two people quoted earlier said. A final decision will be taken after SBI Caps completes its assessment of Altico Capital's business.
As part of a resolution proposal which Altico Capital had presented to its lenders, the NBFC had also sought additional funding to stabilise its operations and pay immediate dues, BloombergQuint had reported on Sept. 20. This plan, however, is currently not under consideration by the lenders.
The real estate financier has been facing liquidity stress like the broader NBFC sector following the collapse of the Infrastructure Leasing & Financial Services Ltd. last year.
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