• Liquidation under Companies Law as means of recovery.
• Liquidation proceedings carried out by High Courts – Apex Court in each State.
• Liquidation process fraught with delays.

• Entry norms for foreign capital are eased. Private Sector is offered greater role.
• Changing composition of labor from farm to industry raises need for protection.
• Large import of technology and capital goods exposes economy to cyclic stresses.
• Rising interest rate and weakening Rupee expected to erode repayment capability.
• Lending is recourse based. Capital, Industry and Labor require protection.
• Sick Industrial Companies law passed to set up a Board for Reconstruction (BIFR).
• Industrial enterprises and guarantors before BIFR eligible for protection from recovery measures.
• Reserve Bank lays down guidelines to be followed by banks for restructuring of debt.
• Government lays out policies to provide framework to deal with sick enterprises.

• Doubtful debt provisioning sets in. Balance Sheets of banks show fractures.
• Recovery efforts of banks against industrial enterprises faced with BIFR’s protection.
• Recovery of Debt law passed and Recovery Tribunals are set up.
• BIFR competent to permit to banks to initiate recovery measures against erring.

• Banks permitted to lend against real estate. Land values start moving up. Change of land use offers opportunities in asset stripping, a new class of recovery.
• Lenders willing to trade in distress debt / control the process of liquidating assets.
• Securitization and Enforcement of Security Interest law passed.
• Reserve Bank permits banks to trade stressed assets and setting up of Asset Restructuring Companies. Parking On-the-fence eases.
• Manufacturing looks up and capital market improves.
• Significant recovery from industrial sickness.
• Deep restructuring plans carry recompense obligations on borrowers.

Banks and approved financial intermediaries (Asset Restructuring companies – ARC- and Non-banking Financial companies - NBFC) permitted to trade

• Owner managements often bring new debt holders to table, and restructure.
• Banks prefer to take co-operation of owner managements to avert delay / litigation.
• Fiscal benefits pending collection by Authorities are auctioned – NPV basis.
• Resolution Agents, a new class of intermediaries.

• Appropriation of cash flow realized from holding-on operations.
• All lenders may not provide funds for holding-on operations, asset maintenance.
• Recovery measures in case of consortium financing require super majority.
• Small value / 2nd / residuary charge holders become difficult to deal.
• Settlements with stakeholder/s outside the main settlement accelerate recovery.
• The acquirer has to be swift, and mobilize opinion with other lenders.
• Liabilities towards workmen and taxes can negate recovery efforts.
• Asset quality / quantity deteriorates if the person in possession is irresponsible.
• Deep payment plans linked to free cash flow continue to be exposed to same risks.
• Settlement for cash / stock / dispossessed collateral is the preferred way.
• Legal processes can delay actions / recovery.
• Process to change management does not yield if sitting management is hostile.
• Experience of rating agencies is limited.

• Debt instruments, having cross border implications, call piece by piece dealing.
• Emerging complexity of corporate structures demands wider set of skills.
• Internationalization of businesses will lead to a need for networked consultants.
• Company law Tribunal to consolidate possibilities before BIFR & Companies law.
• Legal decisions are defining the processes; rules of natural justice followed.
• More powers to banks / ARC to change management.
• Protection from recovery will not be available without lender consent.
• Plans for Holding-on operations will have to address needs of security holders.
• Short term interim managers to handle the restructuring process.
• Administration and Liquidation with the help of outside agencies.

• Acquirers can be Banks, NBFC, ARC.
• Banks ring fence by setting up ARC’s and moving out their stress assets.
• Reserve Bank is the approving agency for NBFC and ARC.
• Foreigners setting-up / investing in NBFC and ARC to meet capitalization norms.
• Stress assets sold through tenders and at times as basket; rule of highest bid.
• The investment and profits can be repatriated after meeting taxes.

Acquirers working outside the Regulatory can acquire:

• Off-shore instruments like, convertible bonds, etc. issued by Indian companies.
• Exposure in off-shore entities of Indian company.

• Off-shore fund with an AMC, investing from tax friendly jurisdiction in equity of sick companies, to retire debt default obligations of sick company.
• ARC to consolidate debt to achieve super majority (working with sitting / hostile management).