Videocon Industries promoters seek fresh package for debt restructuring

The package would result in banks getting back Rs 33,400 cr from the company over the next few years

In a last-ditch effort to save Videocon Industries from going into liquidation, the promoters have sought a debt restructuring package which would result in banks getting back Rs 33,400 crore from the company over the next few years. 

The company was sent to the National Company Law Tribunal (NCLT) for debt resolution in December 2017 and almost shut operations.

The committee of creditors (CoC) is expected to take up the latest proposal from the promoter on Wednesday. It has been made under Section 12A of the Insolvency and Bankruptcy Code (IBC). This section of the IBC allows withdrawal of IBC proceedings — provided majority of the lenders agree. Since the banks have not received any viable offer for the company, the CoC is going to discuss the fate of the company on Thursday.

According to the proposal, the debt recast proposal will have the cut off date as March 1, 2020, and a new company will be incorporated. 

The entire business of consumer electronics will be transferred to this division along with sustainable debt.

While the Rs 15,000 crore sustainable debt will be interest bearing, the banks will have to forgo interest on rest of the debt worth Rs 18,389 crore, promoter V N Dhoot wrote to the banks. 

The home appliances business, along with Rs 10,000 crore of existing debt, will be transferred to the new firm. 

The principal repayment of rupee term loan worth Rs 8,000 crore would be rescheduled in the new company and will be paid on ballooning basis in 144 monthly instalments from March 1, 2021. Interest on this loan will be paid monthly on a ballooning basis (varying between 2 per cent and 13.97 per cent per annum) till final repayment, giving a yield of about 9 per cent.

Of the Rs 18,389-crore residual debt, the plan proposes non-interest bearing bonds of Rs 4,757 crore (housed in oil and gas division). They will be issued within 90 days from effect of the restructuring package. Another set of zero-coupon bonds will be issued for Rs 4,032 crore, against unpaid interest till March this year. These bonds will be redeemed from 2036. Finally, one more set of zero-coupon bonds will be issued for Rs 2,100 crore. These bond will be redeemed from March 2036. The real estate assets will be housed in an another company, which will take on a debt of Rs 3,500 crore on its books.

The offer, made on August 31, said the company was impacted by the Supreme Court’s decision to cancel 2G technology-based telecom licences, which resulted in a loss of Rs 10,000 crore. 

Besides, the collapse in demand for cathode ray tube TVs and crash in real estate also impacted cash flows.

Despite all these setbacks and losses, Videocon Group said it has been repaying debt within the prescribed time and without any concessions, until May 2016. Around May 2016, Videocon Group’s accounts were declared special mention account (SMA-2) by the joint lenders’ forum (JLF). Subsequently, there were meetings with the JLF for a corrective action plan in a time-bound manner.

But by May 2017, the Reserve Bank of India came out with its norms under the IBC and the company was sent to NCLT by 2017-end. This was even as the JLF was ready to restructure debt after a forensic audit gave the company a clean chit.

In its latest proposal, Videocon promoters have said since 1984, when Videocon Group set up its business, and till December 2016, the group was never a defaulter.