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Lenders Choose Restructuring Over Bad Bank for Sadbhav
6 Apr
Summary
- Lenders approved a ₹1,517 crore debt restructuring package.
- Sadbhav Engineering will convert loans into convertible debentures.
- The company avoided an offer from the National Asset Reconstruction.
Lenders to Sadbhav Engineering have chosen to restructure the company's debt outside of insolvency courts, turning down a revised offer from NARCL. This decision came after a consortium-led resolution plan was approved by lenders representing a significant majority.
The finalized restructuring package amounts to ₹1,517 crore. This agreement, executed on March 25, 2026, involves ₹906 crore in fund-based exposure and ₹610 crore in non-fund-based limits. The plan aims to resolve stressed assets without resorting to lengthy court proceedings.
Under the approved plan, fund-based loans will be converted into convertible debentures. A portion of the debenture interest will be converted into equity, alongside existing and additional promoter debt. This deleveraging strategy aligns promoter interests with those of the lenders, who include major banks like PNB, Union Bank of India, and Axis Bank.
NARCL's previous bids were significantly lower, and the lenders' decision to pursue restructuring reflects a preference for a staggered recovery mechanism over a sale to the bad bank. This move follows a period of financial stress for Sadbhav Engineering, which had previously been admitted to the Corporate Insolvency Resolution Process but successfully challenged the ruling.
