Aviral Jain Featured in VC Circle Story on Coronavirus Impact on Distressed Assets

Aviral Jain, Managing Director and Co-Head of the Restructuring Advisory Services practice at Duff & Phelps, recently shared his views for a VCCircle story discussing the occurrence of renegotiations for distressed assets falling under the Insolvency and Bankruptcy Code (IBC) due to the coronavirus outbreak. He stated, “Clearly, this isn’t a good time for the distressed assets space. In many resolution cases, some investors are awaiting tribunal approvals while others are showing lack of interest in finalizing the plan. And given that the underlying business value is declining, investors are also pulling out of the plans.” 

He further points out that even approved resolution plans will be tested as funding for assets committed before the pandemic may never come through with non-banking financial companies battling COVID-19. According to statistics, till December 31, 2019, before the pandemic had taken over the world, the Indian bankruptcy tribunal admitted 3,312 companies for resolution under IBC. Proceedings had begun for 3,254 cases before the outbreak, going by the Insolvency and Bankruptcy Board of India (IBBI) and a total of 1,351 cases had been closed. Of these, 57.7% were under liquidation and 14.06% ended with a resolution plan. However, things may turn out differently for liquidation cases.

Aviral continued, “Certain sectors including airlines, real estate, hotels and hospitality will require further relaxations to preserve the value of assets. For the next few months to almost a year, these sectors will hardly find consumer demand. Therefore, it would not make sense to do the sale process under IBC immediately after the lockdown is lifted, as the value will be majorly impacted, and financing of the transaction will remain a challenge. In the short term, bankers will not want to sell under IBC as they need more clarity from regulators on the haircut.”

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