Holders of foreign currency convertible bonds (FCCBs) issued by gelatin maker Sterling Biotech are planning to move UK courts for recovery of $184 million (nearly Rs 1,000 crore). The five-year bonds were due for payment in May 2012.
“We are moving the UK court for recovery of dues. The case will be filed later this week,” a bondholder told Business Standard.
The bondholders are objecting to certain transactions with Sterling’s oil venture in Nigeria. According to them, Sterling Biotech has 17 per cent equity in the venture for a paltry $20 million, whereas the actual value is manifold.
“The reserves were valued by the company to be $10 billion. If so, how can a 17 per cent stake be sold for $20 million?,” the bondholder questioned.
According to the company filings, Sterling Biotech’s equity stake in Sterling Oil Resources came down to 0.7 per cent in 2011 from 19.1 per cent at the end of 2010.
Sterling Oil Resources, through its step-down subsidiaries in Mauritius and British Virgin islands, owns 90 per cent stake in a vehicle that has licensed an onshore block in Nigeria and produced around 1.5 million barrels of crude oil.
Nitin Sandesara, managing director and promoter of Sterling Biotech said, “We have offered them a package. We are in negotiations.”
Though the company has appointed advisers Houlihan Lokey and Avista to restructure the terms, bondholders are not ready to accept these terms due to the alleged discrepancies they have discovered in the books.
“Whether they go to court or not, the company’s intention is to pay the money back. Universally, it is bondholders’ strategy to pressurise the company,” said an adviser to the company.
In 2007, Sterling Biotech had issued $250 million (Rs 1,350 crore) convertible bonds. Of these, the company has redeemed and converted bonds amounting to $115 million (Rs 620 crore) or 46 per cent of the initial issue. The conversion price of the bonds was Rs 163. However, the share price has plummeted to below Rs 7 due to the company’s debt problems.
Therefore, on May 17, the company was supposed to repay the remaining bonds. The maturity value of these bonds are $184 million (Rs 1,000 crore), on which the company defaulted. Lenders say the plants of the gelatin maker are running well below capacity as it is not able to get working capital loans. State Bank of Mysore and IDBI Bank have already filed lawsuits for recovery of dues.
Shares of Sterling Biotech gained five per cent to close at Rs 6.33 each.