ABG Shipyard promoters to lose controlling stake

After ICICI, all members of lender consortium to process conversion of CCPS into equity

Promoters of debt-laden ABG Shipyard will soon be losing their controlling stake. The lenders have commenced conversion of compulsorily convertible preference shares (CCPS) into equity, part of its debt restructuring process.

This conversion provision was part of the company's corporate debt restructuring (CDR) package, approved by its lenders in March 2014.

“The process of converting CCPS to equity is on and will take another 15 days at least. Maybe by October-end, you will see the lenders taking controlling stake in the company, where 51 per cent would be with them and the balance with promoters,” a senior Shipyard official told this newspaper on Wednesday.

According to a BSE notification, ICICI Bank had acquired 1,10,46,424 equity shares of ABG by exercising its option to convert CCPS into equity. This had led to the bank acquiring 11.08 per cent stake in ABG, the country's largest private sector shipbuilder. 

ICICI is lead lender of the 22-member consortium that has lent to ABG, where the debt burden is Rs 16,000 crore. In September, shareholders of ABG formally rejected its lenders' proposal to invoke Strategic Debt Restructuring. Under this, banks which have given loans to a corporate borrower get the right to convert all or part of their loans into equity, enabling them to take control.

“Since the lead banker has initiated CCPS conversion, other member bankers will follow,” said a consortium member.

"By this conversion, the interest portion of the total debt gets converted to equity and the company is left to pay only the principal amount. So, this route will lower the company's debt burden,” said the member.

ABG, like many other shipbuilding companies across the globe, is going through a rough patch due to a longish grim business cycle. Reliance Defence Engineering (erstwhile Pipavav Defence & Offshore) has managed to remain afloat but another peer, Bharati Defence & Infrastructure (formerly Bharati Shipyard) is struggling at the hands of an asset reconstruction company.

Shares of ABG rose nearly 10 per cent on Wednesday, to end at Rs 34 a share on the BSE.
A SINKING SHIP?

• ABG Shipyard is the country’s largest private sector shipbuilder
   
• The shipyard carries a debt burden of Rs 16,000 crore
   
• ICICI Bank has acquired 11,046,424 equity shares of ABG Shipyard by exercising its option to convert CCPS into equity
   
• ICICI Bank is the lead lender of the 22-member consortium
   
• This conversion provision was part of the company’s corporate debt restructuring package
   
• Shares of ABG Shipyard rose nearly 10% to end at Rs 34 a share on the BSE
   
• Bharati Defence and Infrastructure is also struggling at the hands of an asset reconstruction co