Omaxe in talks with 14 banks for debt restructuring

Omaxe said it is in talks with 14 banks to restructure debt after international rating firm Fitch downngraded the Delhi-based developer’s long-term debt programme by one notch.

Fitch on February 13 downgraded Omaxe’s national long-term rating and the rating on its Rs 300 crore long-term debt programme to ‘BB-(ind)’ from ‘A-(ind)/Negative’, citing concerns on the company’s profitability and operational cash flow because of the challenging industry environment.

“The rating action also relates to heightened concerns over Omaxe’s short-term liquidity position, which has shown signs of weakening over recent months and has therefore created a degree of short-term refinancing risk,” the agency said.

“We are hopeful of getting Rs 900 crore worth of debt restructured soon,” said Sunil Malhotra, vice-president, finance, Omaxe. The company has a debt of Rs 1,513 crore on its books. Without disclosing the name of the banks, Malhotra said the company is in advance talks and most of the banks are likely to agree. The company has already restructured Rs 130 crore short-term debts as long-term liabilities.

After the restructuring, the company expects cost of funds on the outstanding loans to drop by as much as 150 basis points. The developer’s average cost of funds is around 14 per cent.

Indian developers including Omaxe, DLF and Unitech are in talks with lenders to restructure debt and lower interest cost to tide over the cash crunch. The move comes after the Reserve Bank of India allowed banks to restructure real estate loans in a bid to stimulate the sector and avoid accumulation of bad loans at the lenders.

Omaxe reported a significant fall in operating performance with revenue and net income falling by 73 per cent and 96 per cent, respectively, as against corresponding quarter the previous year. The net profit of the company fell 96 per cent to Rs 5.89 crore for the third quarter.

Omaxe has to repay about Rs 85 crore of debt by March 31, 2009. The company has postponed implementation of several of its project by at least two years.