Lenders to Altico Capital India Ltd. are trying an unusual method to cut debt at the shadow lender, as attempts to sell the company or restructure the loans face challenges including swelling soured credit and a funding squeeze.

Creditors have asked each other to bid for an asset swap that would make real estate firms, until now funded by Altico, liable to directly repay the debt, according to people familiar with the matter. This approach would inject some cash into Altico while isolating its viable projects from poorer quality ones, the people said, asking not to be identified as the details are private.

Under the proposed deal, creditors will bid for loans to at least five earmarked projects by the end of Monday. They can choose the mix of Altico debt and cash they are willing to swap for new property-company debt, with indicative levels set at 65:35, the people said.

As many as a third of Altico’s creditors have indicated interest in the plan, the people said, betting that they have a better chance of recouping their investments from good-quality property projects rather than the struggling financier.

A spokesman for Altico declined to comment, while a representative for SBI Capital Markets, the adviser to creditors, did not immediately respond to phone calls and an email seeking comment.