Photo: Pradeep Gaur/MintMumbai: The bankruptcy resolution process has a joker in the pack in the form of uninvoked corporate guarantees, muddying valuations, forcing banks to book losses, and bringing the appellate tribunal into the picture. Many firms had extended corporate guarantees to healthy subsidiaries based on which they got bank loans; but the parents themselves defaulted and went to the resolution process. In many cases, the subsidiaries are still paying dues and, hence, the corporate guarantees that the parents provided are still alive. “Due to this, and divergence of views on this issue, financial creditors may not favour including issuers of such uninvoked corporate guarantees in the CoC. Ltd to be treated as financial debt which was actually a corporate guarantee.

Source: Mint March 13, 2018 18:45 UTC