The domestic financial institutions led by Industrial Development Bank of India are scheduled to meet foreign lenders on Wednesday to discuss the buyout of Dabhol Power Company's $300 million overseas debt.
According to finance ministry sources, in the meeting held in Singapore on April 22-23, the lenders could not reach an agreement. The foreign lenders were more inclined to take the legal recourse than settle the issue across the table, they said.
The sources said the de-dollarisation of the foreign debt was the key to bolstering the Indian lenders' negotiating power vis-a-vis GE and Bechtel, which hold 10 per cent each in DPC. Once the overseas debt is bought over by the domestic financial institutions, the entire equity of the company will be pledged with them.
The Indian lenders plan to float a special purpose vehicle to take over the debt. The special purpose vehicle will then issue securities backed by the central government guarantee to raise funds
The special purpose vehicle was necessary since the existing Indian lenders had individually exceeded the Reserve Bank of India set limits for exposure to a particular project or company.
Indian banks and institutions had an exposure of over 2.2 times the total exposure by the foreign lenders to DPC, the sources said.
The takeover of foreign debt is also the key to the creation of unencumbered assets for potential Indian bidders to the mega power project.
Meanwhile, the sources said the Naresh Chandra committee would continue to work on finding a solution to the vexed Dabhol project. "Former US Ambassador Naresh Chandra will continue to head the committee till further government orders," said a source.
The sources said there were about six parties including the Reliance group and Tata-BP consortium, which were still interested in buying DPC.
"They have periodically shown interest in buying DPC and their interest has not waned," the source added.
