Debt for Equity
Equity in India is a challenge.
Converting defaulted (or precipice of default) debt into equity could be the subject of case studies that would occupy name brand educational institutions for the fullness of time
The smartest central banker on the planet is doing his best to protect the folly of government owned bank managements while preserving the countries sovereign rating. A courageous and patriotic man.
The end state for success will require modern bankruptcy laws and enforceable contracts (India at 186 for contracts and no bankruptcy provisions) n a country that has 30 million cases pending in courts around the country
One thing is to convert defaulted debt into 51 % equity. It is quite another to remove managements and assume supply chain and ticking legal liabilities
The RBI relief permits bankers to (i) swap debt for equity (ii) defer making provisions for defaulted debt for 18 months and (iii) pray for a buyer in that period
So the default pile up in the system status quo ante is 2017
The reality is that cash from the assets is not flowing and the only rescue is the next buyer, at whatever price
Swaps for listed companies puts the banks in a unique position of being long the equity of essentially bankrupt companies presumptively without an accounting provision for (i) the the share price at conversion date and (ii) the revaluation of prices over the next 6 (18 months) quarterly intervals
It has to come out somewhere
http://www.livemint.com/Companies/arBX1Jl85lZHR6hAQNU4FK/More-lenders-join-strategic-restructuring-bandwagon.html
Equity in India is a challenge.
Converting defaulted (or precipice of default) debt into equity could be the subject of case studies that would occupy name brand educational institutions for the fullness of time
The smartest central banker on the planet is doing his best to protect the folly of government owned bank managements while preserving the countries sovereign rating. A courageous and patriotic man.
The end state for success will require modern bankruptcy laws and enforceable contracts (India at 186 for contracts and no bankruptcy provisions) n a country that has 30 million cases pending in courts around the country
One thing is to convert defaulted debt into 51 % equity. It is quite another to remove managements and assume supply chain and ticking legal liabilities
The RBI relief permits bankers to (i) swap debt for equity (ii) defer making provisions for defaulted debt for 18 months and (iii) pray for a buyer in that period
So the default pile up in the system status quo ante is 2017
The reality is that cash from the assets is not flowing and the only rescue is the next buyer, at whatever price
Swaps for listed companies puts the banks in a unique position of being long the equity of essentially bankrupt companies presumptively without an accounting provision for (i) the the share price at conversion date and (ii) the revaluation of prices over the next 6 (18 months) quarterly intervals
It has to come out somewhere
http://www.livemint.com/Companies/arBX1Jl85lZHR6hAQNU4FK/More-lenders-join-strategic-restructuring-bandwagon.html
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