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Global loan alchemists queue up

Mumbai, Oct. 18: Deutsche Bank and Lehman Brothers, two of the respected names in the distressed-debt business world wide, have emerged as the most famous aspirants willing to snap up and redeem bad loans.

Thy are following GE Capital, Morgan Stanley and Lone Star, which are finding out how they can take part in the country’s asset reconstruction companies (ARCs). The key concerns are regulations and profit repatriation.

An official with an ARC said his company has received enquiries from all the leading names, though most of the overseas entities are only carrying out what they describe as “ground work” before taking the plunge.

“At present, they are interested in regulations that govern the purchase of such non-performing loans. Some of them have even appointed law firms to get a clear picture. We are confident that in the months to come, there will be a flurry of such proposals,” the official said.

Sources say such loan work-out specialists would become active after the Reserve Bank of India (RBI) frames guidelines for acquisition of assets by an ARC. It is understood here that a committee has forwarded its recommendations to the central bank in this regard.

Though a Deutsche Bank official did not comment on its plan to buy such assets in India, IFCI chief V. P. Singh recently pointed out that the his institution was in negotiations with the bank to find investors of stressed assets.

Industry watchers said the Delhi-based financial institution has considerable experience in distressed debt business in Asian countries like Korea. The bank was one of the entities with whom Korea Asset Management Corp (KAMCO), which specialised in disposing distressed assets, entered into a co-operation pact.

Pursuant to the promulgation of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, two ARCs, Asset Reconstruction Company of India Ltd (ARCIL) headed by ICICI Bank and Asset Care Enterprises Ltd, set up with an authorised capital of Rs 20 crore promoted by IFCI have been set up.

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