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HCC first to go for debt rejig under new scheme
MUMBAI: Construction firm HCC could be the first company to restructure its stressed loans under the Reserve Bank of India’ s new Scheme for Sustainable Structuring
MUMBAI: Construction firm HCC could be the first company to restructure its stressed loans under the Reserve Bank of India’ s new Scheme for Sustainable Structuring of Stressed Assets (S4A).
A joint lender’s forum meeting on HCC held on July 12, decided to resolve the account under the scheme. The S4 A was put in place by RBI early this year after the strategic debt restructuring (SDR) mechanism did not elicit much response from lenders. The new scheme seeks to convert the unmanageable part of a bad loan into shares, while encouraging the company to service the remaining part of the debt.
“Payment of legitimate arbitration claims of over ₹3,000 crore by government agencies can alter the scenario with outstanding funded debt of ₹5,000 crore reducing to less than 50% and the yearly payout would stand reduced to the level of the company’ s current paying capacity ,” said the statement.
Cash flow timing mismatch during last couple of years between claim realisation (including its interest) and debt servicing has been the main issue, said HCC.
Problems compounded after road contractors and building agencies defaulted on payments to HCC due to the global liquidity crunch after the 2009 crisis.
HCC has been involved in recovering dues amounting to ₹11,000 crore from government agencies through arbitration and has got awards worth ₹3,041 crore, till March 31, in its favour.
“However payment of these awards is a challenge and only ₹373 crore could be collected as clients keep appealing to Supreme Court without paying the dues,” said HCC.
The Ajit Gulabchand-managed HCC, which has built Mumbai’s landmark Sea Link and the idyllic resort of Lavassa near Pune, has been grappling with delays in loan payments mainly due to a large portion of receivables being stuck in arbitration.
Under S4A, debt of the company will be bifurcated into two parts — sustainable debt which cannot be less than 50% of existing debt and is serviced over the same terms as that of existing facilities.
The other unsustainable part of the loan can either be converted into equity or debentures. Lenders get 90 days to formulate and implement the resolution plan. While SDR stresses on change in management by asking lenders to take over the functioning of the company, in S4A, the onus is on making the company service part of the debt , thereby involving it in the process.
The company is keen on monetising its non-core assets to generate cash and repay debt. In fiscal 2012-13, the company had availed of a corporate debt restructuring (CDR) package with a consortium of its bankers.
HCC had reported a net profit of ₹84.97 crore in 2015-16, while its turnover stood at ₹4,191 crore.
The shares of the firm closed down 1.23% at ₹24.05 a share on the BSE on Monday.
