HCC to raise Rs 1,750 crore through monetisation of claims

Hindustan Construction Company (HCC) on Tuesday signed terms with a consortium of investors led by BlackRock, which will seek to monetise an identified pool of arbitration awards and claims for a consideration of Rs 1,750 crore.

Under the terms of the transaction, HCC will transfer its beneficial interest and rights in an identified portfolio of arbitration awards and claims to a special purpose vehicle (SPV) controlled by a consortium of investors including BlackRock.

HCC will receive a consideration of Rs 1,750 crore from the SPV which will be utilised to prepay debt of Rs 1,250 crore, including its entire term loan of Rs 942 crore which is due in the next three years and Rs 308 crore of optionally convertible debentures.

The balance Rs 500 crore will be made available to fund working capital and business growth. Consequently, the balance sheet of HCC will stand substantially deleveraged, with debt servicing over the next four years being limited to its working capital facilities.

As a result of the transaction, the company expects about Rs 2,000 crore of working capital assets, being a combination of adjudicated awards and lodged claims, to leave its balance sheet. This will result in a partial write-down of net worth, according to an official statement.

"This unique transaction will help unshackle HCC from mismatches in our cash flow caused by prolonged litigation cycles," said Arjun Dhawan, Director, and Group Chief Executive Officer. "HCC will stand substantially deleveraged as a result, which will bring us towards the end of our financial turnaround process."

Earlier this fiscal year, HCC successfully completed its Rs 497.6 crore rights issue which was oversubscribed, resulting in an increase in promoter group shareholding which currently stands at 34.85 per cent.

With an engineering heritage of nearly 100 years, HCC has executed a majority of India's landmark infrastructure projects. The HCC Group, with a turnover of Rs 10,132 crore, comprises of HCC Ltd, HCC Infrastructure and Steiner AG in Switzerland.