1. Banks may tweak SDR for Alok India, ABG Shipyard; may look for new promoter who will take over debt

Banks may tweak SDR for Alok India, ABG Shipyard; may look for new promoter who will take over debt

Lenders to ABG Shipyard and Alok Industries have changed their plans to implement a strategic debt restructuring (SDR) for the two indebted companies...

By: | Published: May 27, 2016 8:00 AM
In the case of ABG Shipyard too, bankers have decided not to go ahead with the SDR. In the case of ABG Shipyard too, bankers have decided not to go ahead with the SDR.

Lenders to ABG Shipyard and Alok Industries have changed their plans to implement a strategic debt restructuring (SDR) for the two indebted companies, two bankers familiar with the development told FE.

Instead, they are looking at the possibility of putting in place a new management in both companies but outside the purview of the SDR. “Instead of acquiring a stake in Alok Industries by converting loans into shares, what we plan to do is to look for a new promoter who will take over the debt,” a senior banker explained. He added that, meanwhile, the process of recovering the dues would continue. A final decision on the matter is expected to be taken on Friday.

In the case of ABG Shipyard too, bankers have decided not to go ahead with the SDR. “What we are trying to do is bring about a change in the management outside the purview of SDR,” another senior banker observed.
Lenders to ABG include State Bank of India (SBI), Bank of Baroda (BoB), Punjab National Bank (PNB), Central Bank, Dena Bank, Yes Bank and ICICI Bank.

Lenders to Alok industries include IDBI Bank, Indian Bank, SBI, PNB, BoB, Dena Bank and Union Bank.

Bankers point out that effecting a management change outside the purview SDR has several benefits. “The most important advantage is that we are not bound by the 18-month timeline the way we are for an SDR,” one of the bankers quoted above explained, pointing out that the guidelines require banks to sell the controlling stake in a company with 18 months to a new promoter.

“We can install the new management when all negotiations are complete and the buyer is willing to pick up a stake in the company,” the person added.

Moreover, the central bank has allowed banks to upgrade even those accounts for which ownership has been changed outside SDR to a standard asset much like it is for SDR accounts.

ABG Shipyard had a consolidated debt of Rs 6,622.5 crore as of March 2015 while Alok Industries owed lenders Rs 15,298.4 crore.

In response to a clarification sought by the BSE, ABG Shipyard had earlier this month said it was together with the lenders “exploring the possibility of bringing in a strategic investor and discussions are going on with several parties.

However, we have still not reached the stage of any agreement which would warrant us to disclose to the stock exchanges.”

At an extraordinary general meeting held in March, shareholders of Alok Industries had passed a special resolution to enable conversion of debt into equity to facilitate the SDR.

Although bankers have firmed up SDRs for about a dozen companies including Monnet Ispat, Electrosteel Steel, Visa Steel and Jyoti Structures, they have not been able to locate buyers for any others as yet. However, some deals are believed to be in the last stages of conclusion.

The Reserve Bank of India (RBI) had laid down the guidelines for implementing SDRs in June, 2015; the scheme allows lenders to pick up a controlling stake in a company it by converting a part of the debt owed to them into equity. Subsequently, in September, the central bank had come out with norms for change in ownership outside the SDR.

The central had observed that a change in ownership may be by way of sale by the lenders, to a new promoter, of shares acquired by invocation of pledge or by conversion of debt of the borrower into equity outside SDR, or bringing in a new promoter by issue of fresh shares by the borrowing entity or acquisition of the borrowing entity by another entity.

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