Cfcl To Seek Fresh Nod For Converting Loans To Equity

Consolidated Fibres & Chemicals Ltd (CFCL), the G P Goenka-controlled company, will seek shareholders' approval for the second time, for conversion of a part of the loan dues of financial institutions (FIs) into equity shares coupled with issuance of equity shares.

The approval has been sought as the management was unable to implement the financial restructuring package due to procedural delays in legal formalities.

According to the corporate review 1998, the company had, in May 98, obtained shareholders' approval for reducing its equity share capital, allotment of equity shares of Rs 10 each to the

promoter group and to the FIs by converting part of the loan (including interest) into equity share capital. However, since the company was not able to implement the same within three-months from the date of obtaining shareholders' approval, it had to repeat the exercise to conform with the Securities & Exchange Board of India (Sebi) guidelines on Disclosure and Investor Protection (Preferential Issues).

 

Both the resolutions will, therefore, be tabled at the annual general meeting scheduled for September 8.

The company's financial restructuring proposal comprises waiver of penal interest, liquidated damages and all compound interest amounting to Rs 29 crore, reduction of the paid-up equity capital share capital by 50 per cent to Rs 31.21 crore, fresh infusion of funds by the promoter group in the form of equity share capital, conversion of a part of the loan into equity, and reschedulement of the repayment of the balance loans.

Conversion of a part of the FI s dues into equity shares and the infusion of additional funds by the promoters is yet to be completed. Pending completion of the requisite legal and other formalities, the conversion into equity share capital of the loans and interest dues to the FI s has been shown as advance against share capital (pending allotment).

Further, the issue of equity shares to the promoters will be made on receipt of funds in due course.

The reduction of the paid-up equity share capital of the company has been effected upon. It now stands consolidated into one equity share of Rs 10 each for every two shares of Rs 5 each fully paid-up amounting to Rs 31.20 crore.

Implementation of the restructuring package, currently at an advanced stage of implementation, will enable the company to reduce the annual interest burden by almost Rs 18 crore per annum.

To implement the financial restructuring package, the accumulated losses of Rs 110.68 crore set off against capital reserve in the previous period has been reversed as per the reliefs and concessions sanctioned by the FIs.