QVT proposes new recast plan to Wockhardt

The US-based investor fund QVT has proposed an alternative debt restructuring plan to Wockhardt Ltd. QVT and a group of aggrieved investors had filed a winding-up petition against Wockhardt in the Bombay High Court after the pharma major failed to repay its debts on time.

The proposal is to exchange the foreign currency convertible bonds (FCCBs) that Wockhardt failed to buy back at the time of their maturity in October 2009 with fresh FCCBs that will mandatorily get converted into the company’s shares on maturity five years later.

Of the $140 million (Rs 640 crore) of FCCB burden Wockhardt had, half had been taken over by a group of banks, led by State Bank of India (SBI), who agreed to convert these bonds into convertible preference instruments after a period of 8-10 years.

The rest is in the possession of a clutch of investor funds, including QVT. Wockhardt’s own restructuring proposal had been rejected by QVT, but accepted by the SBI-led group of banks.

This is the first time QVT has publicly made a proposal for debt restructuring, according to which QVT and others would end up owning a 14 per cent stake in Wockhardt (at an assumed 10 per cent premium), while the promoter holding would come down to 62 per cent from 72 per cent.

While announcing the proposals, a press release by QVT did not specify if Wockhardt had accepted these or whether they had even been conveyed to the pharma major.

A Wockhardt spokesperson declined to comment, as the matter is “sub judice”.

Wockhardt has been facing hostility from lenders and bond holders after it failed to repay its debts due to the huge foreign currency fluctuation-related losses incurred by the company last year.

QVT wants Wockhardt to issue 1.295 new FCCBs for every defaulted bond at a premium conversion price in relation with the share price of Wockhardt on the date of its maturity last year. It has also sought a semi-annual coupon (interest) of 5 per cent.

It is known that Wockhardt was not willing to discuss an earlier proposal by QVT to restructure the loan as that would have reduced the promoter stake in the company to 54 per cent.

Meanwhile, QVT has warned Wockhardt that if it ignores the proposals made by investors, it may oppose Wockhardt’s attempt to sell its nutrition business to Abbot.