Wockhardt suffers blow to FCCB deal

Singapore hedge fund backs Sun Pharma.

Drug major Wockhardt’s attempt to reach an out-of-court settlement with its foreign currency convertible bond (FCCB) holders has received a major blow.

Singapore-based hedge fund QVT, which was set to reach an agreement with Wockhardt on the issue, has backtracked and now supports Sun Pharmaceuticals in pursuing a winding-up petition before the Bombay High Court.

Settlement of the FCCB issue is crucial to putting Wockhardt back on track. Sun Pharma Global, an arm of Sun Pharma, had filed a petition with the high court in August to stop Wockhardt from reaching a settlement with creditors until its FCCB terms are honoured.

A group of three FCCB holders, led by QVT, had filed a winding-up petition against Wockhardt in January. The matter is expected to come up for hearing in the first or second week of January. The trio holds bonds worth $42 million. Sun Pharma Global holds about $20 million in FCCBs, well above the minimum 25 per cent required to compel the bond trustee to act.

Sources said that after recent meetings between the bondholders and Wockhardt failed, the former now demand fresh terms for a settlement. However, Wockhardt has refused to accept them.

“We neither deny nor confirm (the latest developments) and stick to our earlier stand that Wockhardt should honour its original FCCB terms,” said a Sun Pharma spokesperson. QVT executives in India and a Wockhardt spokesperson declined to comment.
 

TIMELINE
Jun ‘09:	Wockhardt’s lenders ok restructure of Rs 3k cr debt
Sep ‘09:	Wockhardt offers bond buyback or share conversion
Oct ‘09:	3 FCCB holders led by QVT refuse to accept the offer
Jan ’10:	QVT moves petition in the Bombay High Court
Jul ’10:	QVT, Wockhardt near a deal that would end litigation
Aug ’10:	Sun moves HC, asks settlement not be approved
Dec ’10:	QVT backtracks, will pursue its winding-up petition

“Wockhardt cannot take a decision on the bond issue individually, since it is undergoing a debt restructuring process. Many institutional bondholders like State Bank of India had accepted the terms offered by Wockhardt and converted their bonds into shares,” said a source close to the Wockhardt management.

Wockhardt had to pay an outstanding of $110 million worth of FCCBs by October last year. It managed to settle with several creditors, but is still left with disputed FCCBs worth about $75 million.

In a surprising move in August, Sun Pharma moved the high court, asking for its views to be heard before a settlement between Wockhardt and its creditors was finalised. At the time, QVT bondholders and Wockhardt were close to striking a deal and calling off the winding-up petition.

Wockhardt, which first offered a premium of 3.5 cents a dollar, had to sweeten the offer to around 10 cents a dollar to QVT bondholders following intense negotiations, said sources.

Wockhardt shares had touched a 52-week high of Rs 425.60 on the Bombay Stock Exchange on November 15, following news that the company was close to resolving its FCCB imbroglio.

Wockhardt Chairman Habil Khorakiwala had also assured shareholders at the company’s annual general meeting that all aspects of its corporate debt restructuring process, including the FCCB dispute, would be settled by the end of this financial year.

Wockhardt’s outstanding liabilities are being restructured under a restructuring scheme approved by lenders on June 30, 2009. It comprehensively covers FCCB liabilities and crystallised derivatives and hedging liabilities.