Monnet Ispat, lenders agree on debt-equity swap

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Mumbai | Updated: September 9, 2015 1:14:31 AM

Lenders to sponge iron and steel manufacturer Monnet Ispat and Energy will convert a large portion of their loans into equity as part of the strategic debt restructuring (SDR) scheme...

Monnet Ispat reported a net loss of Rs 375 crore in the three months to June, paying interest costs of Rs 233 crore. Monnet Ispat reported a net loss of Rs 375 crore in the three months to June, paying interest costs of Rs 233 crore.

Lenders to sponge iron and steel manufacturer Monnet Ispat and Energy will convert a large portion of their loans into equity as part of the strategic debt restructuring (SDR) scheme, bankers aware of the development told FE.

Bankers confirmed the consortium has discussed the conversion modalities and that the company had agreed to an SDR. “The SDR was invoked on August 22 and the promoters cooperated with the banks,” a source said.

Bloomberg data showed the firm’s gross debt at the end of March 2015 was Rs 11,075 crore, up from Rs 10,737 crore at the end of March 2014.

An SDR allows banks to convert debt into equity shares at a price below the current market value or the average of closing prices during the 10 trading days before the joint lenders’ forum (JLF) decision. They can now own
up to 51% of the equity of the company and have up to 18 months to look for a new buyer. Among the lenders are Punjab National Bank, a few banks from the State Bank of India group and IDBI Bank.

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So far bankers have decided to implement the SDR scheme for Electrosteel Steels, Jyoti Structures and Lanco Teesta Hydro Power.

Shares of Monnet rose marginally by 0.69% on Tuesday to close at Rs 29.20 apiece on the BSE. The stock has lost 24% in the last one month.

Monnet Ispat reported a net loss of Rs 375 crore in the three months to June, paying interest costs of Rs 233 crore.

In FY15, the New Delhi-based firm had posted a net loss of Rs 857 crore on the back of Rs 3,242 crore in revenues with interest expenses more than doubling to Rs 670 crore.

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The firm’s annual report for 2014-15 mentions that its debt was restructured during the year by a JLF with some of the rupee term loans aligned to an interest rate of 13.03%.

Headed by Sandeep Jajodia as its chairman and managing director, the company is promoted by Udhyam Merchandise (38.17%), Sudha Jajodia (1.89%), Sandeep Jajodia (1.69%) and Nikunj Jajodia (4.08%).

An email sent to the company seeking comments remained unanswered and it could not be immediately ascertained if lenders have any buyers lined up.

In its FY15 annual report, the company had said that the dynamics of steel industry have undergone a dramatic change and called for an engagement with the lenders to reorganise the debt profile to establish a viable and sustainable level of debt.

“The exercise is being initiated at right earnest by soliciting the support of lenders within regulatory permissions to achieve debt rationalization and asset classification,” the company said.

It had added owing to the challenges facing the industry, Monnet has put in place several building blocks to enhance operating efficiency, optimise costs, and expand its dealer network for deeper market penetration.

The company was established in 1994 under the leadership of Sandeep Jajodia and according to its website its business portfolio encompasses manufacturing and marketing of sponge iron, steel and ferro alloys. It is also engaged in mining of minerals like coal and iron ore, besides generation of power for captive consumption.

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