Essar insolvency judgement risks damaging debt market


Essar insolvency judgement risks damaging debt market

India’s insolvency tribunal has made a dangerous decision. Unless its judgement is quashed, credit costs for India Inc. will surge, shares of state-run banks will swoon and foreign investors will flee.

The case concerns the country’s most high-profile bankruptcy, Essar Steel India Ltd. Insolvency judges recently ruled that creditors whose claims are backed by collateral won’t get preferential treatment in the $6 billion sale of the company’s plant to ArcelorMittal. Secured creditors will stand in line with unsecured creditors.

This isn’t how it works anywhere in the world, and for good reason. In loans backed by collateral, the lender expects to be paid first out of bankruptcy proceeds. Read More

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