SP Group's debt recast gets KV Kamath Committee, lenders approval

As part of the OTR plan, the Shapoorji Pallonji group has agreed to sell key assets, including its stakes in Eureka Forbes, Sterling and Wilson and land parcels, to raise Rs 10k cr and repay its loans

In a move that gives respite to Shapoorji Pallonji (SP) Group, the Indian lenders and the KV Kamath Committee have cleared its one-time restructuring (OTR) proposal. All debt restructuring proposals above Rs 1,500 crore were referred to the expert committee at its meeting on Tuesday.
 
Shapoorji Pallonji and Company’s (SPCPL’s) — the holding company of the 150-year-old SP Group — debt repayment obligations in 2020-21 are Rs 5,320 crore at a standalone level and Rs 10,000 crore at a consolidated level. The total group borrowings amount to more than Rs 25,000 crore, while the flagship firm has Rs 23,500-crore debt on its books.
 
SPCPL had sought the OTR for its obligations under the Covid relief framework regulations of the Reserve Bank of India (RBI). The firm had applied for relief under the provisions in September last year. It had not made any payments due to its lenders, including investors of its commercial paper, after making the OTR application. The OTR had been invoked on October 26, 2020. The inter-creditor agreement had been signed by all eligible lenders on November 24 last year.
 
The group, which lost a key corporate battle with Tata Group in the Supreme Court, will not be able to pledge its 18.4-per cent stake in Tata Sons, observed lawyers.
 
“Tata Group may try to block the pledging of shares on the grounds that if SP Group defaults, shares may be auctioned to third parties. This will be contrary to the articles of association of Tata Sons,” said lawyer H P Ranina.

 
As part of the OTR plan, the group has agreed to sell key assets, including its stake in Eureka Forbes, Sterling and Wilson Solar, Afcons Infrastructure, and land parcels, to raise Rs 10,332 crore and repay its loans after the moratorium. The proceeds from the proposed monetisation of assets will be utilised towards prepayment of loans worth Rs 9,348 crore.
 
SP Group has sought a two-year debt repayment moratorium from its lenders, given the real estate sector and its mainstay construction business are enduring slowdown in the wake of the Covid-19 pandemic.
 
Along with asset monetisation, inter-corporate deposits (ICDs) given to SP Group companies by the flagship company are also expected to be realised — primarily from SD Corporation (Rs 1,000 crore) and entities comprising Shapoorji Pallonji Real Estate worth Rs 1,299 crore in 2021-22 through monetisation of their project assets. Proceeds from ICDs aggregating to Rs 836 crore are proposed to be utilised for prepayment of outstanding debt; the balance for operations of the company.
 
The group, in negotiations for debt recast plan, had asked lenders to defer its principal repayment by two years (or eight quarters), in line with the recommendations of the Kamath panel appointed by the RBI to help companies affected by the pandemic, and regard outstanding interest as capitalised or converted into funded interest term loan. It had also asked for interest on all facilities till September 30 to be converted into a loan.