Lenders set to clear recast plan for Jain Irrigation

Lenders led by State Bank of India (SBI) have approved the Rs 4,000- crore recast plan for Jain Irrigation systems, two people familiar with the development said. Based on the resolution plan, the promoter will receive funding of Rs 130 crore while the interest cost is expected to halve to Rs 200 crore.

Under the recast plan, of the total debt, Rs 2,800 crore has been classified as sustainable. The company will have to bear an interest rate of 9% on the sustainable debt, while no interest would be charged on the Rs 1,200 crore of what’s classified as unsustainable loans. The unsustainable debt will be converted into debentures, payable after eight years at 0.01% interest.

A spokesperson for Jain Irrigation confirmed the development but declined to comment further as the restructuring process is confidential.

“Jain irrigation will be one of the few large corporate accounts that have secured a go-ahead from lenders under the Covid recast plan,” said an official aware of the plans. “The future plan submitted by the management looks good and reduction in interest cost will help them execute the turnaround.”

Lenders will also convert some part of the debt to equity and pick up a stake of 15%. The promoters are also expected to infuse some capital in the firm and pick up equity against that.

The promoters have told the lenders that they have plans to sell non-core assets and focus on non-government projects. The trouble for Jain Irrigation began after it reportedly failed to secure payments from the government despite executing irrigation projects based on government subsidies.

The debt pile, liquidity issues and delay in servicing debt prompted rating firms to downgrade the company. S&P had downgraded Jain Irrigation to junk grade while Care Ratings had also downgraded it to ‘D’ last year due to a delay in servicing debt.

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