Lanco gets lenders' approval for CDR

Co expects turnaround by March

Bankers of power generator Lanco Infratech on Wednesday approved a proposal to restructure a total of Rs 7,700 crore of the company’s debt. Corporate debt restructuring will allow the company a two-year interest holiday.

Debt of Rs 4,400 crore, as well as non-fund-based exposure such as bank guarantees and letters of credit worth Rs 3,300 crore, will be restructured.

The company will also get additional funds of Rs 2,500 crore from the bankers. Of this, Rs 1,060 crore will be non-fund based. “We will use the additional funding to pay vendors, suppliers and other service providers,” said Adi Babu, chief financial officer of Lanco Infratech.

The company’s due payments stand at about Rs 1,500 crore. It will spend an additional Rs 1,000 crore on impending work.

BREATH OF FRESH AIR

• CDR will give the company a 2-year interest holiday
• Rs 4,400-crore debt, Rs 3,300-crore non-fund-based exposure to be restructured
• Company will get additional funds of Rs 2,500 crore from bankers
• Lenders will reduce interest rates 2.5 per cent for the first 3-4 years
• In subsequent years, the interest rate will be increased 4.5%
• Promoters to pay Rs 153 crore before master restructuring agreement is signed

The promoters of the company, including Chairman L Madhusudan Rao, will have to put in Rs 153 crore and the payment has to be made before the master restructuring agreement is signed; it is expected it will be signed by the end of the month.

According to the agreement, the lenders will reduce interest rates 2.5 per cent for the first three-four years. This will be compensated in subsequent years, when the interest will be increased 4.5 per cent.

“The moratorium will ease liquidity and will help us ease existing activity. This will help us make a comeback in the engineering, procurement and construction (EPC) business. We will go ahead with our EPC business aggressively,” Babu told Business Standard. He expects business to return to normal by March.

In the last 10 months, the company’s EPC operations have been stalled. In addition, Lanco also saw a freeze on payments from state electricity boards, leading to a huge funding gap. The power generator is yet to receive about Rs 2,000 crore from power distribution companies in Karnataka and Haryana.

“There are two tariff orders pending with the Central Electricity Regulatory Authority and the Appellate Tribunal for Electricity. Once these orders and judgments are passed, it will take around six months for payments to be cleared. We expect the payments to come in time, not immediately,” said Babu.

Lanco’s power generating capacity is about 4,732 Mw. The power business was affected by issues such as lack of fuel supply to its coal- and gas-based power plants.

The company says a complete turnaround in the power sector will be seen only when the government provides fuel. Also, state electricity boards should increase rates; they should also be in a position to buy more power, not go for power cuts.

“Once these corrective measures are taken by the government, it will help the sector see a turnaround. But for the company, we expect many issues to be resolved by March, expect for fuel for our gas-based power plants,” Babu said.