ABG Shipyard on Wednesday said that its shareholders have rejected a proposal to convert debt into equity in favour of lenders under Reserve Bank of India’s strategic debt restructuring (SDR) mechanism. Through a special resolution, it had sought approval to allow lenders convert up to Rs 16,397.50 crore of debt in exchange of more than 51% stake in the company.
At its annual general meeting (AGM) held on September 19, 2.55 crore shareholders or 99.99% voted against the SDR proposal and only 2,040 shareholders voted in favour. This is the first instance where shareholders have rejected a company’s plan to implement SDR. The company’s standalone gross debt stood at Rs 8,742 crore in FY16, up 26% from the previous year. In FY16, the company reported a net loss of Rs 3,705 crore on the back of Rs 34 crore in revenues.
Last month, the company had informed stock exchanges that its board has approved the strategic debt restructuring invoked by its lenders. “The Board has approved the strategic debt restructuring (SDR) invoked by CDR lenders,” the company had said, adding that the proposal was subject to approval from the shareholders. In response to a clarification sought by the BSE in May, ABG Shipyard had said it was, together with the lenders, “exploring the possibility of bringing in a strategic investor and discussions are going on with several parties.
FE had reported that in the case of ABG Shipyard, 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,” a senior banker had said. Lenders to ABG include State Bank of India, Bank of Baroda, Punjab National Bank, Central Bank, Dena Bank, Yes Bank and ICICI Bank among others.
Through SDR rules, banks can convert debt at a price below the current market value or an average of closing prices during the ten trading days before the JLF decision. They can now own at least 51% of the equity of the company. Although lenders have 18 months, from the date the SDR scheme is effective, to find a buyer for the company, the conversion of debt into equity should happen within 210 days in order to retain the standard asset classification.