Ballarpur Industries' Rs 1800 crore loans sold to Edelweiss

Paper maker, Ballarpur Industries' loans worth Rs 1800 crore have been sold to an asset reconstruction company, Edelweiss, by the borrowers Axis Bank and ICICI Bank.
 
It is noteworthy that, this is potentially the first case involving selling off a bad loan to an asset reconstruction company (ARC). Axis Bank has sold Rs 1,200 crore of loan to the ARC; while ICICI Bank has sold Rs 600 crore of loans to the same entity.
 
The landmark deal was wrapped up last week itself. These transactions were effected sans any haircut as these loans have not yet been categorised under non-performing faculty.
 
The structure adopted for the sale was in the ratio of 15:85, whereby 15% payment was done via a cash transaction, and the residual 85% payment was done in the form of security receipts.
 
Avantha Group is the parent associate of Ballarpur Industries, functional in the paper and pulp segment. Loans of Rs 6000 crore were disbursed to the Company, which it failed to repay in scheduled time. In the month of February, India Ratings had assigned a 'D' rating to the Company, one which portrays a default in timely servicing of loans.
 
Banks are now becoming increasingly cautious, and in cases where they gauge that there could be a bad loan shaping up, they are planning to go in for a sell out, this particular transaction being the first one of its kind in India.