Indian lenders unaffected by Renuka Brazil’s bankruptcy filing

By: | Published: October 6, 2015 11:14 PM

Indian lenders are unlikely to be impacted from the filing for bankruptcy protection by Shree Renuka Sugars' Brazilian subsidiary, India Ratings said today.

Indian lenders are unlikely to be impacted from the filing for bankruptcy protection by Shree Renuka Sugars’ Brazilian subsidiary, India Ratings said today.

On September 29, Shree Renuka Sugars had announced that its Brazilian subsidiary has filed for bankruptcy protection as operations were hit by a crash in sugar prices in the last two years.

Mumbai-based Renuka Sugars had in 2010 forayed into Brazil, the world’s largest sugar producer, by investing Rs 1,765.10 crore to acquire stakes in Renuka do Brasil and Renuka Vale do Ivai.

“The filing for protection under Judicial Recovery by Shree Renuka Sugars Ltd’s (SRSL) Brazilian subsidiaries is unlikely to impact SRSL’s bankers/non-convertible debenture subscribers,” India Ratings and Research (Ind-Ra) said in a statement.

“However, one of the company’s Indian bankers will be an exception with a total exposure of USD 16.4 million,” it added.

Renuka do Brasil and Renuka Vale Do Ivai, collectively known as Renuka Brazil, are SRSL’s Brazilian subsidiaries.

“SRSL has not extended any additional financial support to Renuka Brazil post 2010-2012 and neither has the existing corporate guarantee extended for loans availed by the latter been invoked,” India Rating said, adding that it does not expect any incremental drain on SRSL’s standalone cash flows due to the filing.

In the agency’s view, the relief package arising out of the filing if approved is likely to be effective only from FY17 and could result in a reduction in the consolidated debt levels (Brazilian debt levels for FY15 –USD 650 million/ Rs 4,420 crore u2013 50 per cent of consolidated debt).

The rating firm said that the “negative outlook” on SRSL reflects its expectation of the latter being exposed to refinancing risks in the interim.

SRSL has scheduled standalone repayments (maturities of long-term loans) of Rs 410 crore and Rs 220 crore for FY16 and FY17, respectively.

“Given the prevailing sugar down-cycle, the agency expects SRSL’s profitability to be impacted in spite of higher profitability in the by-products segment,” the rating firm said.

Stating that co-gen and ethanol profitability accounted for 25 per cent of the total segment profitability for FY15, the agency expects the operating cash flows to remain stressed over FY16-17.

“The company is in discussion with its bankers to refinance some of its upcoming repayments,” India Rating said.

The agency rated SRSL’s Rs 250 crore non-convertible debenture programme at ‘IND BB-‘ with a negative outlook.

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