Lenders to Hindustan Construction Company (HCC) have decided to recast the company’s debt obligations of R4,904 crore via the sustainable structuring of stressed assets (S4A) scheme, senior bankers confirmed to FE. Bankers also plan to restructure loans to Adhunik Alloys & Power (AAPL) and Adhunik Power and Natural Resources (APNRL) so as to make it easier for them to repay their combined loans of R3,616 crore. Lenders are also hoping to be able to initiate an S4A scheme for Asian Colour Coated Ispat (ACCIL) which owes them R3,019 crore.
This is the first lot of companies for which the S4A scheme is likely to be implemented after the Reserve Bank of India (RBI) had notified the scheme in June. “Techno-economic viability (TEV) studies are favourable for these companies and we are finalising the terms of S4A,” a senior banker said. As per the scheme, the debt of the companies will be bifurcated into two parts — sustainable and unsustainable — such that the sustainable portion is not less than 50% of the total.
HCC reported a net loss of R318 crore on revenues of R8,768 crore in FY16. In July, the company had informed stock exchanges the joint lender’s forum (JLF) meeting held on July 12, 2016 had decided to resolve the account under S4A. Subsequently, however, bankers clarified that while they had agreed to look into the proposal, no conclusive decision had been taken at the meeting. HCC’s stand-alone gross debt stood at R4,904 crore in FY16, Bloomberg data showed.
Adhunik Power reported a net loss of R151.08 crore in FY14 (latest data available) and its gross debt stood at R3,116 crore, of which R2,474 crore were project loans while working capital limits comprised R694 crore. While bankers had earlier initiated an strategic debt restructuring (SDR) scheme for Adhunik Power, the idea was abandoned since only one firm, OPG Group of Industries, had shown interest in acquiring the company.
Adhunik Power entered into a memorandum of understanding (MoU) with the Jharkhand government to set up a 1,080-MW coal-based thermal power plant. The firm has implemented a 540-MW (2×270-MW) power plant at villages Padampur and Srirampur in Seraikela-Kharsawan district in Jharkhand.
Adhunik Alloys reported a net profit of R11 crore on the back of R657 crore in FY14 and its gross debt stood at R500 crore in the same period. The firm operates an integrated steel plant, based on sponge iron technology, was allotted North Dhandu Coal block in Jharkhand. However, the central bureau of investigation (CBI) had found irregularities in the coal blocks allotted to the company and others.
FE had earlier reported that led by State Bank of Patiala, lenders commissioned a TEV study to see if Asian Colour Coated Ispat (ACCIL) is a fit candidate for S4A.
The S4A scheme has been viewed as an improvement over the SDR plan since it allows banks to retain the promoters whereas the SDR envisaged bringing in a new set of promoters. While banks have initiated an SDR for more than a dozen firms, they have been unable to rope in new promoters for even one company. Many of these exposures have been classified as NPAs.
The S4A scheme is a more lenient to lenders since bankers may need to taken an effective haircut of 50% if only half the debt is found to be sustainable.
The scheme, however, does not permit changes in the terms of either the moratorium or the payments of principal or the interest. Banks are permitted to convert the ‘unsustainable’ part of the debt into equity or redeemable cumulative optionally convertible preference shares (CRPS). To be eligible for the scheme, the projects should have commenced commercial operations and the total exposure (including accrued interest should be more than Rs 500 crore. Moreover, lenders need to have provided for at least 20% of the total loans.