Lenders meet today to review HCC's debt rejig plan

The lenders will subscribe to 24.44% fresh equitywhich will bring down promoter holding from 36.07% to 27.44%

The creditors of Hindustan Construction Company (HCC) will meet on Wednesday to review RBI-mandated overseeing committee's (OC) approval of scheme for sustainable structuring of stressed assets (S4A) of the firm. RBI is Reserve Bank of India.
 
Last week, OC met and gave its nod for implementation of S4A to restructure Rs 5,107 crore of HCC's debt. Besides this restructuring package, the company will also benefit from government scheme for releasing part of money stuck in arbitration, a top executive with a financial institution said.
 
Twenty lenders led by ICICI Bank have an exposure of Rs 5,100 crore to the construction firm, which had turned dud loans some years ago. The joint lending forum (JLF) will meet on Wednesday. It will review the OC's decision and decide on a course of action. It will also fix timeline and milestones for implementation of S4A, a banker said. The restructuring of loans will reduce debt and stretch period for repayments. The money coming from arbitration, after giving bank guarantees, will improve cash flow for HCC, said a public sector banker. HCC is the first company to secure approval by OC underthe RBI's S4A, which was notified this June. Under the scheme, HCC's Rs 5,107 crore of debt is divided into two parts,  sustainable debt of Rs 2,681 crore (52.5 per cent) and unsustainable debt of Rs 2,426 crore (47.5 per cent).

 
The lenders will subscribe to 24.44 per cent fresh equity which will bring down promoter holding from 36.07 per cent to 27.44 per cent.The share price will be determined as per Sebi guidelines.The portion of unsustainable debt will be converted into optionally convertible debentures for 10 years with coupon of 0.01 per cent, 11.5 per cent yield-to-maturity (YTM).The S4A scheme envisages the determination of a sustainable debt level for stressed borrowers, and bifurcation of outstanding debt into sustainable debt and equity/ quasi-equity instruments, which are expected to provide upside to lenders when the borrower turns around.The scheme covers projects that have started commercial operations and have outstanding loan of over Rs 500 crore.