A consortium of 27 lenders led by ICICI Bank have decided to restructure more than Rs.2,000 crore worth of debts of infrastructure major Hindustan Construction Company (HCC) — one of the first instances where the ‘Scheme for Sustainable Structuring of Stressed Assets’ or S4A has been invoked has since it was introduced by Reserve Bank of India on June 13.
The Joint Lender’s Forum meeting of HCC held on July 12 has decided to resolve the account under the recent RBI S4A scheme after EY recommended the lenders to opt for RBI’s new tool for debt restructuring. Under the S4A scheme, the debt of the company, of about Rs.5,000 crore on standalone basis, will be bifurcated into two parts — sustainable debt and unsustainable debt.
The sustainable debt of about Rs.3,000 crore will have to be serviced by the company at same terms as that of existing facilities, while the other unsustainable part of Rs.2,000 crore of loan is likely to be converted into equity, redeemable optionally convertible preference share, optionally convertible debentures, with clearly spelt out terms.
The lenders get 90 days from ‘Reference Date’ or from July 12, 2016 to formulate the resolution plan and implement the same, along with necessary internal approvals, according to a company statement.
Positive moveHCC feels that it’s a positive move from the lenders and the resolution will support towards sustained long-term solution for the company. “This move will improve our cash flows as our debt and interest servicing liability for the sustainable debt will be reduced from Rs.900 crore to less than Rs.600 crore a year,” Praveen Sood, Group CFO, HCC said. “The non sustainable part of the debt may be paid once we receive our legitimate dues by the government agencies of arbitration awards over Rs.3,000 crore.” HCC is banking on arbitration, worth Rs.3,041 crore up to March 31, 2016, to go in its favour. But payment of these awards remain a challenge and only Rs.373 crore could be collected as the clients appeal to higher courts.
