Corporate debt restructuring cases cross 100-mark in 2012

In a growing sign of companies facing difficulties in meeting their financial obligations, the number of corporate debt restructuring cases in India since the beginning of 2012 has crossed the century-mark.

A total of 101 cases have been referred for Corporate Debt Restructuring (CDR) in 2012 as on September 30, involving a collective debt amount of close to Rs 64,000 crore, as per the data available with the CDR cell of bankers.

RBI had helped set up CDR system in 2001 to help the corporates facing financial difficulties due to "factors beyond their control and due to certain internal reasons."

Besides helping the corporates manage their huge debts, it also seeks to safeguard the interest of banks and financial institutions through restructuring of certain debt cases.
High interest costs, along with overall sluggishness in the domestic and global economies have made it difficult for the companies to meet their debt obligations -- resulting in a spurt in CDR cases.

As per the latest data available with CDR cell, a total of 466 cases, involving total debt of Rs 2.46 lakh crore, have been referred to it since its inception. Of this, 101 cases involving about Rs 64,000 crore have been referred in 2012 itself.

Besides, a total of 51 cases have been approved for restructuring of debt amount totalling nearly Rs 45,000 crore in 2012 as on September 30.

In the first two quarters of the current fiscal 2012-13, a total of 74 debt cases have been referred for restructuring debts totalling about Rs 40,000 crore. This is a higher number than the referred CDR cases for an entire financial year ever.

In the previous fiscal 2011-12, 87 cases (then a record) with an aggregate debt of about Rs 68,000 crore (over USD 12 billion) were referred for corporate debt restructuring.

The amount of such distressed debt had grown nearly three-fold from Rs 23,000 crore in 2010-11, while the number of cases also grew sharply by 78 per cent.

As per the CDR data, a total of 50 cases involving an aggregate debt amount of Rs 40,000 crore were approved during 2011-12. In comparison, a total of 27 cases with Rs 7,000 crore were approved for CDR exercise in 2010-11.

During the fiscal ended March 31, 2010, a total of 31 CDR cases were approved for debt of Rs 18,000 crore.

Experts say that rising number of CDR cases does not augur well for the banking sector, as also for corporates.

Of the total 466 cases referred to CDR cell so far, 75 cases involving Rs 27,400 crore have been rejected by the bankers, while 64 cases (totalling over Rs 31,000) crore are under finalisation of restructuring packages.

A total of 327 cases have been approved since the start of CDR mechanism as on September 30, 2012 for a total amount of Rs 1.88 lakh crore.