Lenders approve Lanco Infra’s debt restructuring plan

BL : Rishikumar 12 Dec 2013

In a major relief to cash-strapped Lanco Infratech Ltd, a consortium of lenders, headed by IDBI Bank Ltd, on Wednesday approved a corporate debt restructuring (CDR) package for the holding company.

The decision to clear the Rs 7,000-crore CDR package and release Rs 3,500 crore towards working capital will enable the company to resume EPC (engineering, procurement and construction) operations, which were hit by a cash crunch, said T. Adibabu, Chief Operating Officer, Finance, Lanco Infratech. After securing the approval at the CDR Empowered Group meeting held in Mumbai, Adibabu toldBusiness Line that a majority of the 27 banks in the consortium has cleared the package and the remaining few are expected to conclude the process soon.

The whole process will be completed before the month-end. “Within a week, we expect to get a letter of approval which will also outline various terms,” he said.

Under CDR, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates. A CDR is approved if at least 75 per cent of the creditors by value of the loan and 60 per cent by number back the proposal.

Lanco hasn’t released the details of its CDR package.

“With the CDR package through, the company will now have access to Rs 3,500 crore, which includes Rs 2,500 crore as fund-based money and the Rs 1,000 crore as non-fund. This will enable us to resume EPC works and pay up contractors and others. The company has more than Rs 25,000-crore worth of contracts,” Adibabu said.

The diversified infrastructure company has had to pass through several tough quarters amid low plant load factor at its power stations hit by fuel concerns and slow execution of EPC contracts due to regulatory delays. To add to this, the cash flows, too, were hit. The company had posted a loss of Rs 581 crore in the second quarter ended September 30. The company has a total debt of Rs 36,000 crore. While its initial concern is about the debt, analysts believe it will be several quarters before the situation turns around for the company.

DIVESTMENT

Lanco Infra had earlier hinted at divesting a stake in some projects, including at Udipi, Budhil, Babandh and other road projects. It is also seeking to divest a stake in its solar power project. However, the market conditions and investor sentiment had impacted the stake sale process.

“We hope to conclude these as the sentiment gets better and international and domestic investors see good times ahead,” Adibabu said.

A short-term breather Under CDR, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates. A CDR is approved if at least 75 per cent of the creditors by value of the loan and 60 per cent by number back the proposal.

(This article was published in the Business Line print edition dated December 12, 2013)