FIs led by IDBI have worked out a package to restructure the liabilities of the company through the subscription of non-convertible debentures (NCDs) amounting to Rs 39.64 crore. The debebtures will carry a zero interest up to April 1, 2000, said institutional sources.

The NCDs will be redeemed at a premium from October 1, 2000. The premium would work out to an effective yield of 17 per cent on NCDs and rupee loans.

"DCL Polyester's problems stem from downturn in the polyester market. Recall of loans is not a wise proposition in all the cases. Moreover, DCL had a good track record and till October 1998, the company was repaying the interest on loans. The recast package is basicallydeference of liability and there is no waiver involved," said a top IDBI official.

DCL Polyester started finding the going tough in 1996-97 after it was hit by recession and consequent oversupply in the polyester industry. For the first time since inception, DCL witnessed a cash loss of Rs 3.69 crore during the first six months ended September 1998.

The company was a victim of rising prices in the fibre intermediate (PTA, MEG) and corresponding increase in the selling price of polyester yarns and fibres.

IDBI lent a helping hand by rescheduling the eight quarterly instalments due in October 1996 to September 1998 aggregating Rs 54.20 crore with re-phased instalments carrying an interest of 20 per cent. However, this did not have the desired effect.

A recent meeting of senior executives from financial institutions decided in favour of an exercise to restructure the libailities of the company to tide over the liquidity crunch.

Incidentally, DCL was left out last year when financial institutions workedout a detailed restructuring plan for Modern Industries and Sanghi Polyester. Institutions were actually hopeful of DCL being able to beat recession by virtue of its strong fundamentals, said IDBI sources.

While the company's outstandings with IDBI come to around Rs 77 crore, it owes Rs 10.33 crore and Rs 13.54 crore to ICICI and IFCI respectively. The working capital facilities have been sanctioned by a consortium of seven banks led by SBI. The Banks together have sanctioned an amount (fund-based) of Rs 40 crore.

The company recorded a loss of Rs 11.98 crore on a sales of Rs 134.26 crore during the six months ended September 30, 1998.