Banks, FIs turn the heat on SPIC

The corporate debt restructuring (CDR) cell of banks and financial institutions has rejected a request from the Southern Petrochemicals Industries Corporation (SPIC) to waive the personal guarantee of vice-chairman Ashwin C Muthiah for clearing the over Rs 3,000 crore debt recast of the company.

Ashwin is the son of SPIC chairman A C Muthiah. The waiver had been sought on the ground that Ashwin is a non-resident Indian (NRI) businessman who does not hold any executive power in the company.

Further, A C Muthiah had argued that the personal guarantee given by him covered that of his son as well.

"The CDR cell has taken the view that Ashwin's guarantee is necessary as he had earlier given a commitment to that effect," senior institutional sources said.

Confirming the move, a SPIC spokesman in a faxed response to a Business Standard questionnaire, stated: "SPIC Ltd has sought the waiver of the personal guarantee to be given by Ashwin C Muthiah, as a part of the debt recast of the CDR Cell. The waiver has been sought on the ground that Ashwin C Muthiah is a non-executive director on the SPIC board. We now understand that the CDR Cell has decided that the restructuring of debt can be completed only with the guarantee from Ashwin Muthiah."

SPIC chairman Muthiah had contended before the CDR cell that company had a proven good track as far as debt repayment was concerned for about 20 years and the present problems of the company was owing to the change in the Union government's fertiliser policy brought about retrospectively.

He argued that with the cost reduction measures instituted by the company and the proposed divestment of various businesses is expected to net the company Rs 250 crore and this will help it bounce back.

SPIC's net worth has been eroded owing to accumulated losses. The company's net worth stood at Rs 10.93 crore on March 31, 2003, down from Rs 653 crore in 1999-2000.