I Squared Capital and
Abu Dhabi Investment Authority (ADIA), is close to signing an agreement with IL&FS to purchase its seven toll road projects with an enterprise value of around Rs 20,000 crore, three people with direct knowledge of the deal said.
The sale, which is in the final stages, will give the beleaguered IL&FS much needed liquidity of Rs 6,000 crore-Rs 8,000 crore by way of equity returns to repay some of the loans that faced defaults due to a funds crunch. IL&FS, with 348 companies under its umbrella, has a debt of Rs 91,000 crore.
“The deal includes debt of around Rs12,000-14,000 crore and rest will go towards equity of the seven operational toll projects,” one of the persons quoted above said. IL&FS has 28 build-operatetransfer (BOT) projects under the listed IL&FS Transportation Networks (ITNL).
At an enterprise valuation of Rs 20,000 crore, with a maximum equity component of Rs 8,000 crore, the new buyers would assume debt of Rs 12,000-Rs 14,000 crore. In effect, about Rs 20,000 crore of debt could be pared down by the IL&FS Group, including potential repayments of other outstanding debt, using equity returns from this deal.
The newly appointed board of IL&FS under Asia’s richest banker Uday Kotak is considering ways to generate immediate cash flows and is exploring options to sell the rights to operate toll roads built by it, besides selling other assets in the energy sector, ET reported last month.
Last week, the board appointed three advisors to formulate and execute a resolution plan for the debt-laden company. Ace deal maker Rajeev Gupta’s Arpwood Capital and Nimesh Kampani’s JM Financial have been appointed as the financial and transaction advisors (FTAs), while global consulting firm Alvarez and Marsal (A&M) will work as the restructuring advisor to the IL&FS board.
Many road projects of IL&FS are nearing completion or have been completed but these were not generating cash flows because of delay in putting the toll collection system on time. In many cases, the government also built service roads alongside helping smaller vehicles bypass the toll plaza leading to losses for the toll operator, the ET report said.
Emailed queries to Gautam Bhandari, founder of I Squared Capital did not elicit any response. The official spokesperson for IL&FS declined to comment.
Singapore-based Cube Highways, a platform floated by I Squared Capital and backed by International Finance Corp. and ADIA, operates 1,700 km of highways in India. Last month, it acquired infrastructure group HCC’s entire stake in Farakka-Raiganj Highways for an equity consideration of Rs 372 crore.
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