McLeod Russel defaults at Rs 1,187 cr; to sell tea estates to pare debt

Williamson Magor Group (WMG) owned McLeod Russel on Wednesday said it has defaulted on payments of Rs 1,187.09 crore till December 31, 2019.

According to a regulatory filing on the BSE, the company said that while its total indebtness, inclusive of long-term and short-term loans stands at Rs 2,189.85 crore, a default of Rs 1,187.09 has been made by the firm.

The disclosure follows market regulator SEBI tightening its disclosure norms for reporting loan defaults. According to law, any default in repayment of either the principal or the interest amount to lenders borne by listed companies which continues beyond 30 days of the pre-arranged repayment date has to be made public. The move is aimed at bringing in more transparency for the investors to monitor the financial health and stature of a company.

This is the first time the financially stressed McLeod has made public the total payment it has defaulted with the lenders under this new regulation.

Last year, after this WMG firm suffered ratings downgrade for a fourth consecutive time, sources had claimed that Rs. 800 crore of short-term loan repayment was due and doubted McLeod’s ability to repay. Its former auditor, Deloitte Haskins & Sells as well as the current auditor, Lodha & Co have also expressed doubts if the company could stay in business.

According to Lodha & Co, Inter Corporate Deposits (ICD) aggregating to Rs 2910.70 crore, as on December 31, 2019 (including Interest of Rs 64.61 lakh accrued till March 31, 2019) has been given to certain companies.

“The amount outstanding as on this date as given above is doubtful of recovery. In absence of provision there against the loss for the period is understated to that extent. Impact in this respect have not been ascertained and disclosed in the Statement," Lodha & Co said in its report during reviewing the third quarter results of the company.

While McLeod has resorted to sell its tea estates to pare its debt it is also in discussion with the lenders for loan restructuring to make them sustainable. Such restructuring, according to McLeod would also help rationalise the costs and infuse liquidity over a period of time.

Further SBI Capital Markets has been appointed by the lenders to work out and recommend resolution plan and possible course of action on the matter.

The professionals so appointed have submitted their reports including the draft resolution plan which is pending before lenders for their consideration and decision.