Institutional sources said that they will "reconsider" their decision to grant an in-principle approval to the group's financial restructuring proposal following its failure to hive-off Modern Denim. The recast proposal sought concessions in repayment of loans and redemption of non-convertible debentures and preference shares in April last year.

However, the institutions had stipulated certain conditions which included fresh infusion of Rs 50 crore by the promoters by selling off Modern Denim. A trigger option was stipulated, which gave institutions an automatic right to put on sale the assets of Modern Denim or any other company within the group to mobilise Rs 50 crore without making any further reference to the promoters incase the December 31 deadline was not met.

In its proposal for a financial bailout, the group had stated that it was facing financial problems owing to industry-wide recession and stiff competition in the textile industry.

The group had further said that the closure of some of its units in 1996-97 and a run on its fixed deposits, without fresh inflows following the CRB imbroglio, had resulted in a shortfall in working capital. This led to serious liquidity problems and large defaults in repayments to institutions and banks.

While agreeing to the group's proposals, the institutions had given an in-principle approval which included the sacrifice of compound interest and liquidated damages of various companies amounting to Rs 39.89 crore by the institutions. Institutions had also given a nod to rescheduling loan repayments by converting them into instruments like NCDs.

In Modern Syntex, it was proposed that overdue interest and simple interest accruing up to the cut-off date on all the loans, excludingoverdue interest on a foreign currency loan-FCL-from BV Bank and BHF Bank, Germany, and NCDs from banks and institutions be converted into 16 per cent optionally-secured fully-convertible debentures redeemable in 32 quarterly instalments commencing from the quarter beginning April 1, 2000.

It was further proposed that Modern Syntex's overdue interest and interest accruing up to the cut-off date on FCL from BV Bank and BHF Bank be rescheduled at the document rate and be repayable in 16 half-yearly instalments commencing from April 1, 2000.

In Modern Threads it was proposed that the outstanding principal of all loans sanctioned in rupees, including overdue instalments, be converted into 17 per cent NCDs redeemable in 30 quarterly instalments commencing from October 1, 2001. It was also proposed that preference shares worth Rs 8.75 crore will be redeemed in four annual instalments from 2003-4, against the earlier deadlines of 1997-98 (Rs 3 crore) and from 2001-2 to 2004-5 (Rs 5.75 crore).

The proposal alsosaid that the promoters have decided to transfer the controlling interest in Modern Denim by disposing off their shares and had engaged Jardine Fleming for the purpose. The group's total outstandings towards the institutions stood at Rs 880 crore as on September 30, 1998.According to the projections submitted to institutions, Modern Syntex is expected to record a Rs 28.56-crore loss in 1998-99. During the same period, Modern Threads is expected to incur a Rs 8.24-crore loss.

Further, Modern Terry Towels is expected to record a loss of Rs 12.95 crore during the current fiscal and Modern Denim a loss of Rs 11.92 crore in the same period.

The only exception being Modern Insulators, which is expected to net a Rs 1.12-crore profit in the current fiscal.