Lenders turn the heat on Amtek Auto

Stock tanks 11% while the company says it is in advanced discussions with various Banks and financial institutions for re-alignment of its debt obligations

Lenders have asked Amtek Auto, which has defaulted on Rs 800 crore of bond repayments, to furnish specific plans for selling assets. They have also sought a schedule for the repayments.

Reacting to the default, the Amtek Auto stock on Tuesday plunged to close at Rs 45.05 on the BSE, down 11 per cent.

In 2010, the automotive company had issued secured debentures with a coupon rate of 10.25 per cent, maturing on September 20 this year.

Amtek Auto Ltd informed the BSE, “We wish to clarify that the company is in advanced discussions with various banks and financial institutions for re-alignment of its debt obligations. We assure that if any positive development takes place, it will be intimated to the exchange, according to the requirement of the listing agreement.”

A senior official at a public sector bank said the company’s management was in discussions with banks and lenders to secure financial support to tide over the tight liquidity conditions. Banks, he added, were insisting on a clear asset sale plan to generate resources.

As these bonds were secured instrument (debentures), a legal recourse was available for recovery, but investors were unlikely to use this option, he said.

Going by the Reserve Bank of India’s norms, the debt won’t be treated as a non-performing asset by holding banks for 90 days. Investors might have to make marked-to-market provisions, in line with the norms relating to decline in the value of a security hitting treasury income.

Apart from raising cash to repay debt, the management also faces an inquiry by the Securities and Exchange Board of India, following complaints from bond holders of Castek, a subsidiary company, of price manipulation to trigger the conversion of a $200-million foreign currency convertible bond into equity.

Promoters have infused Rs 75 crore into Amtek Auto. They also plan to raise $1 billion by selling equity in foreign businesses and some non-core businesses and industrial assets in India.