Bombay HC reprieve for Wockhardt

Mumbai-based drug major Wockhardt on Wednesday received a major reprieve, with a two-judge bench of the Bombay High Court allowing an interim stay against an earlier order to admit a winding-up petition against the company.

Following the news, Wockhardt’s share prices on Wednesday rose 4.64 per cent on the Bombay Stock Exchange to close at Rs 331.65 per share.

On March 11, Justice S C Dharmadhikari had admitted a winding-up petition against Wockhardt, filed by a section of the company’s foreign currency convertible bond (FCCB) holders. The FCCB holders were led by Singapore-based hedge fund QVT, Sun Pharma Global and Syndicate Bank. The court had given Wockhardt 12 days to appeal against the decision.

“In the meantime, the company has agreed to deposit in court Rs 115 crore by May 3, according to the direction of the honorable Bombay High Court,” said a Wockhardt statement. The larger bench will take up the matter on May 3.

“The issue is back to square one and the litigation may continue or the FCCB holders may settle the issue out of court,” said an analyst.
 

TIMELINE

JUNE 2009: Wockhardt’s lenders approve CDR package to restructure debts of over Rs 3,000 crore. 

SEPTEMBER 2009: Wockhardt offers to buy back FCCBs due in October with 65 per cent dilution of value or to exchange the bonds for preference shares that are partly convertible in 2015 and partly redeemable in 2018.

OCTOBER 2009: A group of three FCCB holders led by QVT declines to accept the offer.

JANUARY 2010: QVT moves winding up petition against Wockhardt in the Bombay High Court.

JULY 2010: QVT and Wockhardt reach a settlement and decide to end litigation.

AUGUST 2010: Sun Pharma approaches Court demanding that the settlement is not approved. 

DECEMBER 2010: QVT teams up with Sun Pharma and backtracks from the agreed settlement to pursue winding up petition.

MARCH 11, 2011: A single bench of the Bombay High Court admits winding up petition against Wockhardt.

MARCH 23, 2011: Wockhardt appeals the decision and a divisional bench stays the decision of the single bench, to hear the matter May 3.

While QVT and its investors hold bonds worth $42 million, Sun Pharma Global holds bonds worth $20 million.

Before Sun Pharma entered the litigation in August, Wockhardt and QVT reached an out-of-court settlement, with Wockhardt agreeing to pay a premium of about 10 cents/$ to QVT bondholders.

Sun Pharma had, in August 2010, approached the high court to stop Wockhardt from reaching a settlement with creditors till its original FCCB terms were honoured. Later, QVT backtracked from the out-of-court settlement plan and along with Sun Pharma, continued litigation against Wockhardt. QVT had moved the court in January last year, demanding recovery of its investments through the sale of Wockhardt’s assets.

Wockhardt had to settle $110 million worth of FCCBs by October, 2010. Though it settled its disputes with other creditors, disputed FCCBs worth about $75 million remain.

Wockhardt’s outstanding liabilities are being restructured under a corporate debt restructuring (CDR) scheme, approved by the lenders on June 30, 2009. The CDR scheme comprehensively covers the FCCB liabilities and crystallised derivatives and hedging liabilities.