ABG Shipyard heads for recast of long-term debt

ICICI Bank, State Bank of India, IDBI, Bank of India, Bank of Baroda and Punjab National Bank among major lenders to ship building company

Hit hard by adverse business climate and precarious financial health, shipbuilding company, ABG Shipyard Ltd is the process of recasting its long-term debt that forms the bigger chunk of its entire debt kitty.

The company official confirmed the move but declined to divulge details.

A senior executive with public sector bank said, “The reference (to CDR) has been made recently. The sector (shipbuilding) is passing through bad phase due to economic slowdown and this has hit many units in this sector.”

As per the company’s annual report for the year ended March, ICICI Bank, State Bank of India, IDBI, Bank of India, Bank of Baroda and Punjab National Bank are among the major lenders to the ship building company.

The development of ABG Shipyard availing the debt recast programme comes at a time when bankers are becoming increasingly wary of the peer, Bharati Shipyard's Rs 5,860-crore debt recast plan.

Bharti Shipyard has been facing liquidity issues since 2011, and the global recession dealt a severe blow as almost 70% of its customers are Europeans.

Last month, ratings agency India Ratings & Research downgraded ABG Shipyard Ltd's Rs 200 crore non-convertible debenture programme to default from 'IND BB-' earlier, citing delayed payments. A year ago, the Rs 200 crore non-convertible debenture programme was rated ‘A-’ by the agency.

Alongside, the agency has also downgraded ABG Shipyard's long-term issuer rating to 'IND D'.

The downgrade reflects ABG Shipyard's delays in repayments pertaining to the Rs 200 crore non-convertible debenture programme, said the agency.

ABG Shipyard had been experiencing tight liquidity for the past year, triggered by delays in receiving milestone linked payments from clients.

What is driving ABG to CDR

* Liquidity strain,

* Falling financial profile

* Erosion in profitability due to unfriendly business climate