Lanco lenders have option to convert loan into equity

Lanco Infratech which has gone for Corporate Debt Restructuring (CDR) said 25 lenders have been given an option to convert some of their loan amount into equity in future.
Lanco, in a BSE filing yesterday, said the lenders including Life Insurance Corporation and banks will be given an option to convert Rs 3,024 crore out of Rs 11,155 crore of total restructured loan into equity.
Lanco Infratech Chief Financial Officer Adi Babu said the conversion of part debt into equity is a standard norm for a company that goes for CDR.
"This is standard procedure to be followed by any company that opts for CDR. The debt will be converted into equity only in the event of not servicing debt and not addressing the debt properly. In any case, it will happen only after seven years," Babu told PTI.

"We are seeing shareholders approval for the same through postal ballot," he added.
In the event of conversion of loan into equity, lenders will gain control over the company with a stake of 65.83 per cent on the expanded equity base, while the holding of promoters will plunge to 25.26 per cent from 70.2 per cent now. At present, the lenders have a nominal holding of 1.44 per cent in the company.

"As per the terms of the CDR package, the CDR lenders of the company have a right to convert certain restructured facilities into equity shares of the company... Subject to SEBI and other regulatory approvals...," Lanco said.

The total restructured facilities under the CDR package amounts to Rs 11,155.14 crore which includes Restructured Term Loan, the Working Capital Term Loan-1, the Working Capital Term Loan-2, Working Capital Facilities, the Priority Loan, the Additional Working Capital Facility (Non Fund Based Limit) and the Funded Interest Term Loan, it further added.
In order to accommodate the said conversion, it is proposed to increase the Authorised Share Capital from Rs 500 crore to Rs 12,000 crore, Lanco said.
"The CDR package by and between the Company and the lenders of the Company was approved in a meeting held on December 11, 2013, and the Master Restructuring Agreement was executed on December 27, 2013, between the Company and the CDR Lenders," Lanco further said.