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| USL left to fend with PE, rights issue to rid itself of debt |
| BS Reporter / Bangalore Aug 26, 2009, 16:14 IST |
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United Spirits (USL), India's largest spirits firm owned by billionaire Vijay Mallya, will now have to come to terms with private equity investors or turn opt for a Rights Issue, to deleverage its debt-laden balance sheet which is leveraged nearly 3 times.
This move to go in for financial investors as against a strategic investor has been necessitated after global spirits major Diageo pulled out of talks with USL owing to valuation differences after having been in negotiations for nearly 18-months. USL was expecting to raise around Rs 1,200 crore through Diageo and use the proceeds to settle a part of its Rs 7,200 crore debt.
Since the past two months, the USL management has been actively exploring options other than Diageo as it raised Rs 900 crore through the public market by offloading around 10 per cent of its treasury stock. The company is now exploring options with private equity investors — KKR and Capital International, the talks with whom have been also going on for nearly an year. It is understood that USL will also actively look at GDR, QIP or a Rights Issue if talks with PE investors also get delayed.
Industry information indicates that USL will be able to raise another Rs 800 crore through either of this route taking the total fund raising during the year to a little over Rs 1,500 crore which the company will use totally to retire debt. The management of the company has been indicating that a debt of Rs 4,000 crore will be manageable.
USL is expected to offload a part of its treasury stock for the second round of fund raising. The company had sold 10.2 million shares held under treasury stock at just under Rs 900 a share to a clutch of investors in late June and the entire proceeds will be used to settle a part of its debt pile.
USL had borrowed $625 million to acquire Scotland-based Whyte & Mackay for around $1.2 billion during 2007 and it had to repay $115 million during 2009. During May, USL made a payment of $45 million and on top of that it is understood to have made an additional $70 million payment during July, which was actually due during November.
On top of the $115 million actually due during 2009, USL will be paying back an additional $200 million. As against a repayment obligation of $115 million, USL would have paid back $315 million during 2009.
If USL succeeds in raising another Rs 800 crore in the near future and uses it to settle debt, it would have paid back a total of Rs 2,200 crore of the Rs 7,200-crore debt.
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