Banks to work on Koutons' debt recast proposal

BS Reporters / Mumbai March 26, 2011, 1:00 IST Apparel maker and retailer Koutons Retail’s proposal to recast its debt had been admitted by the corporate debt restructuring (CDR) cell, said banking officials in the know. SBI Capital Markets (SBI Caps) has been given the mandate to draft the recast scheme. Koutons is the second such financially-troubled major retailer to have done so, after Vishal Retail, which was admitted for CDR this year.  According to television reports, the company has nearly Rs 660 crore debt on its books, of which Rs 460 crore will go for CDR and Rs 200 crore will be non-CDR. The company is believed to have taken debt at 13-13.5 per cent interest rate. The banks with loan exposure to the Delhi-based retailer include Indian Overseas Bank, Allahabad Bank, IDBI Bank, ICICI Bank and Axis Bank. Its shares on Friday hit the upper circuit of 10 per cent following the reports. They closed at Rs 33.15 on the Bombay Stock Exchange.  Last year, there were reports of default on loan repayment, increase in pledging of promoters’ shares and suspension of the company’s fund-based facilities by rating company Icra. Following the reports, the company’s share price took a hit. Since September, its share price has fallen 87.7 per cent to Rs 33.15 from Rs 269. However, banking executives said Koutons’ account had not slipped to the sub-standard category. Details of the CDR package will be worked out over the next few days. SBI Caps has already prepared a rough package for the company, which includes debt repayment over nine years, including a two-year moratorium, according to the television reports. Executives at Koutons could not be contacted for comments. Koutons’ admission for CDR follows the company’s 18-month efforts to improve declining cash flows and stem losses, which arose due to inventory pile-ups and aggressive expansion. The company’s financial woes came to the fore when it posted a net loss of Rs 317.1 crore and total revenue of Rs 109.8 crore in third quarter of 201-11. Promoters, which own 32 per cent in the company, have pledged 97.99 per cent with the lenders. The company had closed more than 200 stores over the past 18 months and was in the process of closing 50-60 more to improve cash flows, Koutons Chief Financial Officer Ajay Mahajan had said last year.  “We are profitable enough to take care of our interest burden. Yet, there is some scope for efficiencies and savings in interest costs, as rates are relatively high at 14 per cent. We will work towards that,’’ Mahajan had said.