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Haircuts for operational creditors are at par with financial creditors: ICRA
Jun-20-2019

The rating agency ICRA in its latest report has said that operational creditors account for nearly half of the bankruptcy cases admitted at the National Company Law Tribunals (NCLTs) and the haircuts in resolutions taken by them are at par with the same taken by financial creditors. It also said that the operational creditors -- vendors and companies who have dues from a distressed company -- are assumed to be unsecured creditors, unlike the secured financial creditors like banks.

According to the report, the operational creditors have been successful in maintaining their ratio of payouts because of an eye on maintaining relationships by the successful bidders in resolutions processes. It found that of the 92 insolvency resolutions, operational creditors would realise about 42 percent of the total claims and financial creditors would realise 44 percent of the total claims. It believed that the reason the operational creditors have not suffered significantly higher haircuts is on account of the criticality of certain creditors to the core operations of the corporate debtors. As a result, it said the resolution applicants have ensured that relationships with such creditors are maintained.

ICRA further said that the ability to take a company to the NCLTs is one of the biggest successes of the introduction of the IBC (Insolvency and Bankruptcy Code) and such creditors are using the provision proactively and effectively. It noted that of the 1,858 corporate debtors referred to the NCLT upto March 31, 920 or 49 percent cases have been referred by the operational creditors.

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