Lanco Infra to sell 3000 mw power assets to retire part of debt

BL 9 Sep 14

Lanco Infratech Limited has decided to sell up to 3000 mw of power generation assets to raise up to Rs.15000 crore in cash and thereby retire part of the company debt of over Rs. 36,000 crore.

The company had recently divested the 1320 mw Udipi thermal power plant to Adani Group entity for Rs.6,000 crore and Budhil hydel project earlier for Rs. 650 crore to Greenko and about 10 mw of wind generation assets, all with a view to bringing down its piled up debt.

Faced with the challenge of mounting debt and the huge financial commitments to serve the growing debt and poor cash flows due to delays in project implementation impacted by macro economic issues, the diversified infrastructure company has decided to sell several of its assets.

According to the company senior official, since last one year, the company has been working on each of the projects to settle the issues and bring back viability. This includes a major Corporate Debt Restructure process where a clutch of over 25 lenders have agreed to restructure the loans and have laid down certain conditions, including sale of assets to free up equity and pay the debt.

Some of the bankers are keen at early sale of assets so that the debt burden could be brought down, freeing up equity for ongoing projects.

The company has a portfolio of 4732 mw under operation, 4636 mw under construction and around 9000 mw at various stages of development.

Lanco Infra could not mobilise additional funds due to the tough economic scenario and capital markets. Even the overseas investors are treading cautiously on investments in the power sector due to inherent problems faced by the power sector, including fuel supplies and delayed payments by Discoms.  

Lenders to take Charege of Assets Sale at Lanco Infratech

Arun Kumar, ET Bureau | 9 Sep, 2014, 06.51AM 

India's top lenders, impatient with the delays in cash-strapped LancoInfratech's asset-disposal programme, are planning to take direct charge of the process to ensure they get what was owed to them, while providing fresh loans to get projects that have been stuck for various reasons moving again, according to an internal note. 

The banks, which have an exposure of Rs 49,000 crore to Lanco, will set up a three-member committee to run asset divestment. The company, which has been looking to raise money to pare debt, recently found a buyer for its Udupi power project but hasn't met with much success other than that. The lenders in turn will give fresh loans to complete projects that have got stuck. 

The bankers to Lanco, which has a market cap of less than Rs 2,000 crore, have decided that the "lead banker of project under construction may re-appraise the project within September 2014 and consider financing either 80:10:10 or convert part of the debt into equity upfront to ensure projects are completed and lenders can recoup their dues." 

This means that banks will give fresh loans to the extent of 80% of the project cost. In addition, 10% will be given in the form of sub-debt that can be converted into equity any time before the commercial operational date (COD). Hence the promoters need to chip in only 10% of the project cost as equity, said a banker, requesting anonymity.