Banks led by State Bank of India (SBI) approved a Rs 2,850-crore corporate debt restructuring (CDR) package for Bharati Shipyard at a meeting on Saturday. This would put the company in a milder repayment schedule.
Under the new structure, the banks would convert 10 per cent of the company’s loans into compulsory convertible debentures. These would be converted into equity on maturity.
Bharati Shipyard has also secured a two-year debt moratorium. This means the new debt repayment schedule would begin only after 18 months, giving the company enough time to tide over the unfavourable market conditions for shipyards. The cashflow to shipyards has been under pressure due to various factors, including the delay in payment of subsidies for capital expenditures by the central government.
After the restructuring, the company would have to repay debts to all its lenders in eight-10 years, depending on their individual schedules. The average interest rate under the restructured debt is 11-12 per cent.
The company had a total debt of Rs 3,250 crore and had asked for a CDR of loans worth Rs 2,850 crore. In January, Kapoor had told Business Standard, “The majority of our orders come from European markets, which is currently facing challenging times. However, we are in the process of delivering five vessels in six months. The debt restructuring would help us optimise costs and resources in times to come.”
Currently, the company has an order book of Rs 6,800 crore, to be executed by 2014. It is also in the advanced stages of completing two greenfield shipyards at Dabhol and Mangalore. These would ease Bharati’s debt problems and help in loan repayment, as these would be able to execute large orders.
Outside the CDR, Bharati owes Rs 306 crore to five lenders, with the maximum exposure to Development Bank of Singapore, followed by L&T Infrastructure Finance Ltd, Catholic Syrian Bank, Tata Capital and SICOM, a finance company partly owned by government of Maharashtra. The company claims it would continue to meet these obligations according to their schedules, as no restructuring of deadlines is sought in these cases.