ABG Ship in hot water as loan recast cell defers throwing lifeline

Written by Vishwanath Nair | Mumbai | Updated: Mar 15 2014, 06:53am hrs
MoneyABG Shipyard?s Rs 11,500-cr debt recast was put on hold by the corporate debt restructuring cell on Friday. PTI
ABG Shipyards Rs 11,500-crore debt recast was put on hold by the corporate debt restructuring (CDR) cell on Friday with several banks not agreeing to the restructuring. Lenders in the 22-bank consortium decided to keep the ABG package in abeyance till the company regularises its interest payments.

According to a senior official of a public sector lender, the shipping company is already a non-performing asset (NPA) for some banks in the consortium. The company has assured us that it will regularise the payments before March 31. Once it becomes regular, we will approve the restructuring package, the banker said.

For a restructuring package to be approved, 75% of the lenders by value and 60% by number have to agree to the proposal. An email to the company on the subject remained unanswered. ABG Shipyard was referred to the CDR cell in the October-December quarter. According to the details of the restructuring package, the company is understood to have asked for loans of R1,800 crore. Of this, R1,200 crore is in the form of non-fund exposure, R300 crore as a term loan and R300 crore in the form cash credit. The firms contribution to the restructuring package will be a mere R300 crore as promoters equity while banks are expected to take a hit of R1,000 crore.

Under Reserve Bank of India (RBI) rules, promoters must furnish a personal guarantee. If the package is approved by the consortium, the shipbuilding company will get a three-year moratorium on interest payments and a seven-year repayment period for the restructured debt loan.

The company posted a Rs 156-crore loss in the three months to December, compared with a profit of Rs 18.62 crore a year ago. It reported total income of Rs 291.7 crore in the third quarter of FY14, down 40% year-on-year.

The CDR cell, a forum of bankers that takes a call on individual debt recast packages, has seen a spike in the number of cases referred to it, resulting in a steep rise in stressed assets in the banking system.

February saw Rs 4,300 crore of assets being recast across six companies, higher than the Rs 3,500 crore restructured in January.

Among those that sought more lenient terms to repay their loans were Orchid Pharmaceuticals and Chemicals, which wants Rs 2,100 crore recast; Chennai-based Surana Industries, which is looking to rework terms for Rs 900 crore; and AMW, to which banks have an exposure of Rs 300 crore.

Between January and December, the value of loans recast was close to Rs 74,000 crore while the value of loans referred crossed Rs 1 lakh crore. Given the slowdown in the economy, bankers believe many more customers will need help to tide over the situation. They anticipate at least Rs 15,000-20,000 crore will be restructured before March.