Lenders have 18 months to look for new buyer
Lenders to construction firm Coastal Projects have decided to convert a large portion of their loans into equity using the Reserve Bank of India’s (RBI) strategic debt restructuring (SDR) scheme, bankers aware of the development told FE. The banks now have up to 18 months to look for a new buyer with the company having agreed to the SDR.
Following rules for SDR put out by the RBI in June this year, bankers have decided to try out a restructuring for a handful of companies including Electrosteel Steels, Jyoti Structures, Lanco Teesta Hydro Power and Monnet Ispat.
Coastal Projects is promoted by S Surendra, who owns 20.22% of the company and is also the chairman. Other large shareholders, as on December 8, 2014, were IDFC (16.11%), Baring Private Equity Asia IV Mauritius Holdings (2) (10.58%), L&T Infrastructure Finance Company (3.13%) and Multiconsult Trustees (8%). A senior public sector bank (PSB) official confirmed that a consortium of 22 bankers led by SBI has agreed on going through with an SDR.
“Although all banks have agreed on SDR, the leader of the consortium has not yet received the official communication from all the member banks,” the source said.
Hyderabad-based Coastal Projects was referred to the corporate debt restructuring (CDR) cell in October 2013 for the recast of its Rs 3,200 crore worth of debt and was approved on March 26, 2014.
Coastal Projects reported a net loss of Rs 273 crore in FY14, the latest data available, on the back of Rs 1,487 crore in revenues partly because it paid interest costs of Rs 415 crore. According to the company’s annual filings, the gross debt at the end of March, 2014 was Rs 3,247 crore, up from Rs 2,141 crore at the end of March, 2013.
An SDR allows banks to convert borrowings at a price below the current market value and to own up to 51% of the equity of the company. In the case of unlisted companies, a break-up value should be used to arrive at the conversion price. This the book value per share calculated from the company’s balance sheet adjusted for cash flows and financials post the earlier restructuring. According to RBI, in case the latest balance sheet is not available then the break-up value shall be Re 1.
It was reported that private equity firms, including Baring, Sequoia Capital and Fidelity, along with Deutsche Bank, had bought about 16% in Coastal Projects for about Rs 160 crore in March 2008 and in January 2010, they invested another Rs 250 crore. The company was established in 1995 and undertakes construction work for companies raging from Ramky Group, BGR Energy and Jaypee Group, and for state-owned power transmission companies in India.
An email sent to Coastal Projects seeking comments remained unanswered and it could not be immediately ascertained if lenders have any buyers lined up.