Textile cos top distressed list for corporate debt recast Panel witnessing increased inflow of cases from

India Inc.

Recession in the West has hit Indian textiles sector badly. K. Ram Kumar Mumbai, Dec. 14 The intensive care unit for the distressed constituents of India Inc the Corporate Debt Restructuring (CDR) Cell is witnessing an increased inflow of cases seeking debt restructuring. The double whammy of global and domestic economic slump has led to 15 cases, of which over half are from the textiles sector, with cumulative debt of Rs 3,200 crore getting referred to the Cell for restructuring in the last few months. That the crisis in the textiles sector is acute is underscored by the fact that a small committee has been constituted under the aegis of CDR Cell for resolution of cases pertaining to distressed companies from the sector. Of the 15 cases referred to the CDR Cell, eight with debt ranging between Rs 100-200 crore per company are from the textiles sector, while the rest pertain to steel, automobile component manufacturers, and others. CDR role Corporate debt restructuring package is implemented via additional finance, be it for working capital or term loan, being granted by all creditors on a pro-rata basis to a viable corporate, by providing moratorium on interest payments, reducing the interest rate charged, conversion of the corporates debt/ overdue interest into equity, etc. The problems faced by manufacturing units, especially in the spinning, weaving and processing segments, in the textile sector are manifold. Sector of woes Pointing out the predicament of the textile sector, a senior official with a state-owned bank said: Textile exports have been hit hard by the recession in the Western countries. Further, steep increase in the price of inputs such as cotton, dyes and chemicals, electricity, and high interest cost, coupled with the fact that rupee was ruling strong at the beginning of the calendar year added to the woes of textile manufacturers.

Citing client confidentiality, the official declined to reveal the names of the eight textile companies that are currently undergoing restructuring. The downturn in the textile sector has cast a pall of gloom on the future of those employed in the sector. About a fortnight ago, the Commerce Secretary, Mr G.K. Pillai, quoting Textile Ministry estimates, said that five lakh people could lose jobs in the textile sector in the next five months due downturn in the sector. The CDR mechanism was instituted according to the guidelines issued by the Reserve Bank of India in August 2001 for the revival of viable corporates, which sometimes get into financial difficulty because of factors beyond their control and also due to certain internal reasons, as well as to minimise the losses to banks and financial institutions and other stakeholders through an orderly and coordinated restructuring programme. Progress card Currently, the CDR Cell is seeking to restructure 88 corporate debt cases, entailing an aggregate debt of around Rs 47,000 crore. Since inception, the Cell has approved 168 corporate cases for restructuring with cumulative debt of Rs 83,000 crore. Of the approved cases, while 45 corporates (aggregate debt: Rs 32,000 crore) have successfully been restructured, 33 cases (aggregate debt: Rs 3,700 crore) have been withdrawn. References to the CDR cell for corporate debt restructuring can be made either by creditors or borrowers. The scheme covers only multiple banking accounts/ syndication/ consortium accounts of corporate borrowers with outstanding fund-based and non-fund based exposure of Rs 10 crore and above by the banks and financial institutions. The initiative to resolve a case under the CDR system is taken by at least 75 per cent of the creditors (by value) and 60 per cent of creditors (by number).

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