While approximately 95% of the loan is believed to be secured by the companys receivables and 5% is understood to be backed by mortgage of properties, there is no immediate estimate of how much these are worth. Moreover, while bankers do possess the personal guarantee of promoter Jatin Mehta, the value of these properties and Mehtas net worth could not be ascertained. Customers owe Winsome $875 million and group company Forever Diamonds close to $385 million.
They (the customers) have proposed a plan where they will pay $75 million every year for the first three years and then step up their payments from the fourth year, said Ramesh Parikh, director of finance, Winsome.
What makes things more difficult for banks is that Mehta had stepped down from the position of chairman in 2012 and currently operates out of Dubai and Singapore. Till March this year, the companys board had seven members but after news of the companys loan default broke, five board members have resigned. Currently the board consists of only two members, Parikh and R Ravichandran, director, operations. We are looking at appointing a third member soon, Parikh said.
Punjab National Bank is the largest lender in the 15-bank consortium, with an exposure of over nearly R1,800 crore. The banking system is believed to have an exposure of close to R6,000 crore to Winsome Diamonds and Jewellery and group companies Su-Raj Industries and Forever Diamonds.
The jewellery exporters case was referred to the corporate debt restructuring (CDR) cell on June 17 as it was unable to honour its debt repayment obligations to the banks. The proposal was put to vote at a meeting held on Monday and a majority of the bankers rejected it. The approval of an account for restructuring through the CDR cell is taken via a vote, where over 60% of the lenders concerned or lenders representing 75% of the loan amount need to approve the plan.
In its proposal, Winsome Diamonds had asked for a three-year moratorium on the loan starting July 2013 as they do not expect the business to pick up in the near term. The jewellery exporter also asked for a seven-year period to repay the loan amount and sought an interest rate of 10.5% compared to the existing rate of 11-11.25%, said Parikh.
Bankers say they are willing to look at a revised proposal in subsequent meetings when the company submits one.
The lenders had given stand-by letters of credit (LCs) in favour of international bullion banks like Standard Chartered of London, Standard Bank of South Africa, and Scotiabank, which encashed these LCs recently after Winsome failed to pay them. Winsome reportedly ran into trouble after a number of buyers stopped making payments, which led to a default on servicing interest on loans from foreign banks.
Bankers had formed a core group, with the top five lenders, to conduct a detailed investigation into the matter by talking to the buyers who had defaulted on payments to Winsome. They found that these buyers had witnessed huge losses in the commodity and forex derivative markets, leading to the defaults.
Win Some, Lose Some...
* Winsome Diamond owes banks R3,860 crore
* Company headless, after promoter Jatin Mehta stepped down from the board in 2012
* CDR proposal for R3,860 crore rejected on June 24
* Winsome for 3-year moratorium & a 7-year repayment
* Wants interest rate to be cut to 10.5% from 11-11.25%
* Loans secured by company's receivables and 5% collateral on mortgage of properties
* Banks have promoter Jatin Mehta's personal guarantee
* Board had 7 members till March, 5 quit on negative news