Lenders of infrastructure firm Hindustan Construction Company (HCC) have agreed to recast its standalone debt of R4,900 crore under the Reserve Bank of India’s (RBI) scheme for sustainable structuring of stressed assets (S4A), the company said in a statement on Wednesday. This is the first S4A approval by banks after the RBI allowed such recasts last month.
The company said that the joint lenders’ forum meeting held on July 12 passed a resolution to recast its loans following a recommendation from consulting firm EY. According to HCC’s FY15 annual report, its bankers include State Bank of India (SBI) and its subsidiaries, ICICI Bank, Punjab National Bank (PNB), Canara Bank and Bank of Baroda, among others.
The consolidated debt of the company stood at R9,340 crore in FY16 and it reported a net loss of R319 crore on a revenue of R8,672 crore. In FY16, its interest outgo stood at R1,355 crore.
“This will help the company bridge the gap of ‘Cashflow Timing Mismatch’ between claims realisation (including its interest) and debt servicing,” it said.
Under the S4A scheme, the debt of the company will be bifurcated into two parts. One is sustainable debt, which cannot be less than 50% of existing debt and will have to be serviced over the same terms as that of existing facilities. The other, unsustainable part of the loan can either be converted into equity or redeemed through optionally convertible preference share or optionally convertible debentures. Lenders now have 90 days to formulate the resolution plan and implement the debt resolution plan.
“The move comes at an opportune time for HCC as it is on recovery path with order book growth of 35% in last 15 months with the government’s focus on Infrastructure,” HCC said, adding that it faced a challenging period due to a slowdown in the sector in the past and delay in payment of its legitimate dues by government agencies of arbitration awards over R3,000 crore.
The company’s debt was restructured by the corporate debt restructuring cell in 2012 and HCC said that it has made all efforts to remain standard with the banks.
“In last couple of years, HCC took up recovery of its dues amounting to Rs 11,000 crore from the government agencies through arbitration proceedings or contractual procedure,” it said, adding that it has got arbitration awards in its favour worth Rs 3,041 crore up to March 31, 2016. “However, payment of these awards remain a challenge and only Rs 373 crore could be collected as the clients keep on appealing up to Supreme Court without paying the dues,” the company explained.
The HCC scrip on Wednesday closed at Rs 24.05, down 1.23% from its previous close on the BSE.