HCC board to consider equities, debt issuance under S4A scheme

Hindustan Construction Company today said its board would consider issuance of equity shares as well as optionally convertible debentures to lenders under the scheme for sustainable structuring of stressed assets.
The board would look at offering shares representing 24.44 per cent of the expanded capital apart from issuing the debentures on preferential basis to its lenders, the company said in a BSE filing.
Earlier this month, the construction firm had said that RBI-mandated Overseeing Committee (OC) has approved the scheme for Sustainable Structuring of Stressed Assets (S4A).
Restructuring of debt under S4A was approved by the Joint Lenders Forum (JLF) during their meeting held on September 7.

According to the filing, the company proposes to hold its board meet on December 2 and later convene an extraordinary general meeting to seek shareholders' approval in this regard.
Under S4A, about Rs 5,107 crore worth debt is proposed to be restructured. Out of this amount -- Rs 2,681 crore (52.50 per cent) would be considered as sustainable while the remaining Rs 2,426 crore would be treated as unsustainable.

The lenders would subscribe to 24.44 per cent of fresh equity, which would bring down promoter's holding in the company to 27.44 per cent from 36.07 per cent.
The portion of unsustainable debt would be converted into optionally convertible debentures for 10 years with coupon of 0.01 per cent, 11.5 per cent yield-to-maturity (YTM).

"HCC became the first company to secure approval by OC under the RBI's S4A scheme, which is expected to set precedent for future approvals," the company had said.
The S4A scheme envisages the determination of a sustainable debt level for stressed borrowers, and bifurcation of outstanding debt into sustainable debt and equity/ quasi-equity instruments, which are expected to provide upside to lenders when the borrower turns around.