 "Sakthi Sugars reaches amicable settlement with bondholders")
According to a company filing with the stock exchanges today, the High Court of Madras on December 21, 2015, has passed an order on the consent memo filed jointly by the consenting Bondholders and the company to the effect that "the FCCB (Series B) aggregating to $11.7 million will be settled at 65 per cent of the face value on or before March 31, 2016, subject to the approval of Reserve Bank of India". It has decided to withdraw the Scheme of Arrangement it has filed earlier.
The company has earlier said that it is in active discussion with Bondholders having majority of the FCCB for a possible compromise for settlement without involving any conversion of bonds into equity shares,.
Sakthi Sugars Limited, the flagship company of Sakthi Group, is engaged in diverse business activities like manufacture of sugar, industrial alcohol, and soya products, and is into power generation as well.
According to an earlier filing, with a view to ensuring long term viability of the Company and to de-risk the sugar business, which is cyclical in nature, the company during 2007-08 installed a new 3,500 TCD greenfield sugar plant at Modakurichi along with 25 Mw Cogeneration facility, besides a cogeneration plant of 35 Mw at Sivaganga. The sugar unit at Sakthi Nagar was expanded from 7,500 TCD to 9,000 TCD and the Distillery unit was expanded from 90 KLPD to 120 KLPD. A second cogeneration plant of 25 Mw was taken up for installation at Sakthi Nagar. The total capital expenditure incurred for the above was around Rs 500 crore which was funded through Bank Loans of Rs 160 crore, FCCB issuance of $60 million (Rs 245 crore) in two tranches of $20 million and $40 million, and balance from internal accruals.
The expansion plans were based on the assumption of adequate sugarcane availability for the expanded capacities as also the generation of power at full capacity through a mix of captive bagasse available from crushing and imported coal as fuel (at the then prevailing landed cost of around Rs 2,000 per MT).
However, with the shortage in availability of sugarcane for the following two years, the operation of the sugar mills could not be maintained at an optimal level. Further, the cogeneration plants also could not be put to optimal use due to the shortage in availability of bagasse as also high prices of landed coal, it said.
While the Bondholders had a right to conver the bonds into equity sharesas per the terms of the Offering Circular at Rs.190 per share based on prefixed exchange rate of Rs 44.89 per US Dollar, the prevailing market price of equity shares of the company would not help it to realise the value of investment. The company put forward a scheme of arrangement for the Bond Holders to redeem the money over a period of time, which was under consideration till the amicable settlement was arrived at.
