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Dabhol lenders not averse to taking over plant

BS Banking Bureau

Indian lenders to the $3-billion Dhabol Power Company will not hesitate to take over the physical assets of the company if continuous defaults occur, although they are not willing to run a power plant.

"Our business is lending money and not running power plants. But, in the worst case scenario, we are ready to take possession of the plant," said a senior banker.

The total exposure (including guarantees) of the Indian banks and financial institutions is to the tune of Rs 61 billion -- roughly 70 per cent of the debt component of the project which is built on a debt: equity ratio of 70:30.

"We have nothing to be worried about as the ratio of security cover to our exposure is over 100 per cent. Even if it (DPC) goes down, we will still have adequate cover," institutional sources said.

As secured creditors, the banks and financial institutions have first charge on DPC's assets. "Enron Corporation might have filed the bankruptcy suit but DPC is a separate entity. We are sure that a solution will be found before the end of the fiscal year," said sources.

This is, however, not possible without the concurrence of the global lenders to the project. The banks and FIs are willing to cut the interest rates to a reasonable level and also reschedule the maturity profile of the loans to save the project.

The Industrial Development Bank of India and the State Bank of India had earlier cut interest rates. IDBI had slashed the interest rate from 19 per cent to 16.5 per cent. SBI cut it from 17 per cent to 15 per cent. The average interest rate of the FIs is now pegged at 14 per cent.

ICICI, IDBI, IFCI and SBI had earlier filed suit in the Bombay high court to protect and preserve their securities in DPC. They wanted immediate resumption of work on the first phase of the 2,184-mw-power project which has been mothballed. This would ensure cash flow and help the promoters pay the lenders' their dues.

The four respondents to this suit were DPC, the Maharashtra State Electricity Board, the government of India and the government of Maharashtra.

The foreign lenders include Bank of America, Citibank, Credit Suisse First Boston, Japanese Bank for International Cooperation and ANZ Investment Bank.

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