Loan of HCC and Adhunik to be restructured under S4A scheme
Published: Sep 26, 2016
By TIOLCORP News Service
MUMBAI, SEPT 26, 2016: RBI's sustainable structuring of stressed assets (S4A) scheme finally seems to be taking off. Lenders to Hindustan Construction Company (HCC) have decided to recast the company's debt obligations of Rs 4,904 crore via the S4A scheme. Bankers also plan to restructure loans to Adhunik Alloys & Power (AAPL) and Adhunik Power and Natural Resources (APNRL) so as to make it easier for them to repay their combined loans of Rs 3,616 crore. Lenders are also hoping to be able to initiate an S4A scheme for Asian Colour Coated Ispat (ACCIL) which owes them Rs 3,019 crore. This is the first lot of companies for which the S4A scheme is likely to be implemented after the Reserve Bank of India (RBI) had notified the scheme in June.
HCC reported a net loss of Rs 318 crore on revenues of Rs 8,768 crore in FY16. In July, the company had informed stock exchanges that the joint lender's forum (JLF) meeting held on July 12, 2016 had decided to resolve the account under S4A. Subsequently, however, bankers clarified that while they had agreed to look into the proposal, no conclusive decision had been taken at the meeting. HCC's stand-alone gross debt stood at Rs 4,904 crore in FY16, Bloomberg data showed.
Adhunik Power reported a net loss of Rs 151.08 crore in FY14 and its gross debt stood at Rs 3,116 crore, of which Rs 2,474 crore were project loans while working capital limits comprised Rs 694 crore. While bankers had earlier initiated a strategic debt restructuring (SDR) scheme for Adhunik Power, the idea was abandoned since only one firm, OPG Group of Industries, had shown interest in acquiring the company. Adhunik Power entered into a memorandum of understanding MoU with the Jharkhand government to set up a 1,080-MW coal-based thermal power plant. However, the Central Bureau of Investigation (CBI) had found irregularities in the coal blocks allotted to the company and others.
The S4A scheme is a more lenient to lenders since bankers may need to take an effective haircut of 50 per cent if only half the debt is found to be sustainable. The scheme, however, does not permit changes in the terms of either the moratorium or the payments of principal or the interest. Banks are permitted to convert the ‘unsustainable' part of the debt into equity or redeemable cumulative optionally convertible preference shares.
