Amtek set to solve debt issue with JPMorgan

Appoints Morgan Stanley, EY & Grant Thornton to raise Rs 6,500 crore

New Delhi-based auto component maker Amtek Auto is close to reaching a solution with JPMorgan, which holds its non-convertible debentures worth Rs 200 crore.

The non-convertible debentures (NCDs) matured on September 20 but as Amtek Auto was facing a "cash flow mismatch", it was unable to make repayments to its investors.

"We are talking to JPMorgan. We are together working to reach a solution. Within the next two weeks, we hope the matter will be resolved. There will be a solution to the satisfaction of JPMorgan and there will be no default," Arvind Dham, chairman, Amtek Auto, told Business Standard.

FITS & STARTS

2010
Amtek Auto raises Rs 800 cr through
NCDs. The issue was managed by
Axis Bank, which was also one of the buyers

2015
Feb: Two JPMorgan funds buy Amtek NCDs worth Rs 200 cr from the open market
Aug: CARE Ratings suspends the rating of Amtek NCDs because of lack of information

• JPMorgan temporarily stops redemption of two funds with exposure to Amtek NCDs

Sep: JPMorgan segregates assets exposed to Amtek from other assets, resumes redemption
Sep 20: Rs 800 crore becomes due for repayment by Amtek but payments not made

He declined to share details of the arrangement being worked out.

The balance Rs 600 crore of Amtek Auto's NCDs are held by banks. These will be realigned to the company's cash flow and not be due for payment immediately.

Amtek Auto had raised Rs 800 crore through five-year NCDs, at a coupon rate of 10.25 per cent, in 2010.

JPMorgan bought the NCDs through JPMorgan India Treasury Fund and JPMorgan India Short-Term Income Fund in the secondary market earlier this year. The two schemes together had an exposure of about Rs 200 crore or about seven per cent of their total assets under management to Amtek Auto's debt papers, as on July 31.

JPMorgan also had to temporarily stop redemption of the two funds. It was later resumed after JPMorgan segregated the assets exposed to Amtek Auto's debentures from other assets of the scheme.

Amtek Auto Chairman Dham said payment of the balance Rs 600 crore, most of which is held by banks, will go through a rollover process. "As a part of the composite process started for other repayment obligations, banks will also realign this amount with the cash flows," he said.

In August, CARE Ratings suspended the ratings of Amtek Auto's NCDs. It said the company had not furnished the information required for monitoring the ratings.

The company said it could not share the required information as the realignment process with banks was not complete.

The Amtek Group, with four listed entities - Amtek Auto, Castex Technologies, JMT Auto and Metalyst Forgings, has a debt obligation of Rs 19,000 crore, about 80 per cent of which is to domestic banks.

The management had flagged off the cash flow issue to banks in March, following which banks initiated a process of realigning payments to cash flow.

Dham said the group has hired Morgan Stanley to find out an equity buyer in its profit-making overseas assets, valued by the group at over $2 billion.

The group has also appointed EY and Grant Thornton in India to sell non-core assets. The twin exercise, to be carried out over the next 18 months, is expected to generate about Rs 6,500 crore. The amount will be used to bring down the debt to about Rs 11,000-12,000 crore, Dham said.