Lenders may put McNally's debt under Project Sashakt to resolve bad loans

The McNally group has been paring debt across group companies

Lenders are considering a plan for resolution of McNally Bharat Engineering’s debt, which accounts for a chunk of the Williamson Magor Group’s dues, under Project Sashakt — a five-pronged strategy to resolve bad loans.

The engineering company has informed the stock exchanges that its board is evaluating the impact of the proposed resolution plan, the process for which was initiated by lenders under Project Sashakt within the ambit of RBI guidelines outside the National Company Law Tribunal. 

A board meeting held on February 13, to consider and approve the unaudited financial results for the December quarter, was adjourned and will now be held on February 18. 

According to Brickwork Ratings’ release of October 2018, McNally’s debt stood at Rs 3,282 crore and its tangible net worth was Rs 134 crore as of March 31, 2018. Total debt of the group in March was Rs 4,200 crore, according to sources. 

However, sources indicated that McNally’s debt had been brought down to around Rs 1,500 crore through realisations by September. “Project Sashakt was being discussed by lenders and it was being considered positively,” they said. 

The resolution plan will, however, have to get positive rating from two rating agencies. Bank of India is the lead bank in the consortium.

McNally is engaged in providing turnkey solutions in areas like power, steel, alumina, material handling, mineral beneficiation, coal washing, ash handling and disposal, port cranes, and civic and industrial water supply. 

Incorporated in 1961, McNally was a joint venture between McNally Pittsburg and Bird & Co. In 1980, it was acquired by the Williamson Magor Group. The group has been paring debt across group companies. 

McLeod, the largest bulk tea producer, has sold a clutch of tea gardens. So far, in the current fiscal year, it has sold 12 gardens having a combined production of 14.9 million kg. McLeod sold the gardens for Rs 472 crore. However, after the sale of 12 gardens, in September 2018, McLeod had again entered into a memorandum of understanding with proposed buyers to sell another eight gardens for a consideration of Rs 323.61 crore.

As far as Eveready is considered, talks are on for a stake sale. According to sources, a clutch of PE companies, as well as battery majors Duracell and Energizer, are in the fray for a pie of the battery business. 

Non-binding bids were expected to be invited shortly. However, it is likely that the Khaitans would retain a minority stake in the company though several options were being weighed. Eveready’s debt, though, is at about Rs 350 crore.

UNDER STRESS

• McNally Bharat accounted for over 78% of Williamson Magor’s debt as of March 2018
• Under Project Sashakt, resolution for McNally Bharat will be outside the NCLT's ambit
• This plan has to get a positive rating from at least 2 rating agencies
• Eveready Industries, part of Williamson Magor, will be inviting bids for stake sale in this company
• McLeod Russel, another Williamson Magor company, has sold 10 tea estates and is considering selling another 8 to pare debt