Mumbai, February 25: Financial institutions (FIs) are believed to have prepared a new offensive to recover their dues from debt-ridden polyester firms, beleaguered by overcapacity and crashing prices. Defaulting companies will soon be asked to come up with a restructuring proposal including rescheduling loans.The move is a fallout of non-payment of interest despite extending the repayment period of principal dues. Sanghi Polyester and DCL Polyester -- the only firm to have paid interest dues, although the principal dues remain outstanding -- are among major names who will be given the opportunity to recast their institutional liabilities.
It is believed that the gameplan is based on the realisation that the polyester business will not immediately generate enough returns to enable companies to repay their dues.
"Despite extending the period for repayment of principal to March 31, 1998, the companies have not yet fulfilled their terms of interest payment. Given the precarious position they findthemselves in, repayment of principal is also unlikely,'' said an institutional source.
The defaulting companies include Sanghi Polyester, DCL Polyester, Orkay and Baroda Rayon. The Industrial Development Bank of India (IDBI) had extended the repayment period for Sanghi Polyester six months ago. But it is yet to pay the interest. Observers say the company, reeling under a severe liquidity crunch, will not be able to honour its liabilities owing to industry slowdown.
A reflection of this is Orkay Industries, struggling to repay loans even after several reminders from FIs.
The Gaekwads-owned Baroda Rayon is considering options to repay its outstandings to the Industrial Credit & Investment Corporation of India (ICICI). The company recently sold off a section of its corporate office for partial repayment of dues.
But DCL Polyester was prompt in paying interest to IDBI after the repayment period was extended last year.
The scene is likely to worsen with the domestic polyester industry in an over-supplystate, with 40 per cent growth. This has resulted in a price-crash.
In the international market, prices of polyester-filament yarn fell to $1.2 per kg in December 1997 from $1.3 per kg a year ago. Prices of polyester- staple fibre fell to $0.9 per kg from $1.16 per kg during the same period.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
