Supreme Infra’s R4,500-cr debt to be recast under S4A

By: | Published: January 19, 2017 6:10 AM

The company’s debt will be bifurcated into sustainable and unsustainable portions. The sustainable debt will have to be serviced on the same terms as that of the existing facilities

The joint lenders’ forum (JLF) of Supreme Infrastructure India have decided to restructure its debt under Reserve Bank of India’s (RBI) scheme for sustainable structuring of stressed assets (S4A), the company said in a regulatory filing on Wednesday.

According to Bloomberg, its consolidated debt stood at R4,529 crore in FY16. The company reported a net loss of R163 crore on the back of R1,404 crore in revenues in FY16, primarily owing to interest outgo of R360 crore in the same period. Its bankers include State Bank of India (SBI), State Bank of Patiala (SBP), Union Bank of India, Punjab National Bank (PNB), Bank of India (BoI), Central Bank of India, Canara Bank, Syndicate Bank, ICICI Bank and Axis Bank, among others.

Under the S4A scheme, Supreme Infrastructure’s debt will be bifurcated into sustainable and unsustainable portions. “The sustainable debt not being less than 50% of the existing debt will have to be serviced on the same terms as that of the existing facilities,” it said in a statement, adding that lenders have fixed December 29, 2016 as the reference date.

According to RBI guidelines, banks need to convert their debt into equity within 210 days of the reference date, failing which will turn the account non-performing. The statement said that lenders are required to formulate the resolution plan and implement the scheme within the time limit prescribed under the S4A guidelines.

“Once implemented, the scheme would help the company to reduce its interest cost on the unsustainable portion of the debt,” the company said. Supreme Infrastructure is promoted by the members of the Sharma family who jointly own 33.23% and by BHS Housing Private Limited which holds 13.04% shares.

The S4A scheme has been viewed as an improvement over the Strategic Debt Restructuring (SDR) plan since it allows banks to retain the promoters whereas the SDR envisaged bringing in a new set of promoters. While banks have initiated an SDR for more than a dozen firms, they have been unable to rope in new promoters for even one company. Many of these exposures have been classified as NPAs.

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The scheme, however, does not permit changes in either the moratorium or the payment terms for either the principal or the interest. Banks are permitted to covert the ‘unsustainable’ part of the debt into equity or redeemable cumulative optionally convertible preference shares (CRPS). To be eligible for the scheme, the projects should have commenced commercial operations and the total exposure (including accrued interest should be more than R500 crore. Moreover, lenders need to have provided for at least 20% of the total loans.

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