After failed attempts to liquidate Gujarat NRE Coke Ltd, Arun Kumar Jagatramka, promoter and chairman of the delinquent metallurgical coke-maker, is seeking a 20-year lifeline to turn profitable.
Gujarat NRE Coke, which owes over ₹5,000 crore to a consortium of lenders, on Monday unveiled a financial restructuring plan, proposing to repay most of the company’s debts, around ₹2,961 crore, through convertible bonds over a 20-year period.
Jagatramka has sought the approval of shareholders for the new scheme. He will also have to get the approval of the company’s lenders and the National Company Law Tribunal (NCLT) to implement the scheme. Gujarat NRE Coke has convened separate meetings of its shareholders and lenders in Kolkata on 16 July.
Out of the ₹3,501.16 crore in secured loans, Gujarat NRE Coke has proposed to repay ₹500 crore over a period of 10 years, starting with ₹50.5 crore this fiscal. Jagatramka said the company is ready to pay an interest of 8.1%, which would result in a cash outflow of ₹790.79 crore over the 10 years.
The firm will issue shares worth ₹40 crore immediately to secured creditors, but the rest—₹2,961.16 crore—will be converted into 0.01% compulsorily redeemable preference shares (CRPS) in 20 years. The nominal coupon rate is to be settled through a one-time payment at the time of redemption. But the unsecured creditors of Gujarat NRE Coke and those who lent against foreign currency convertible bonds (FCCB) have been offered a deep discount. The company owes its unsecured creditors ₹1,502.41 crore, and FCCB holders ₹140 crore.
Foreign currency lenders are being offered a 90% haircut, wherein shares worth ₹13.99 crore will be issued when the scheme is implemented.
Unsecured creditors will have to take a 50% haircut, and the amount due to them will be repaid only in shares.
The firm will issue shares worth ₹23.53 crore to unsecured creditors, and repay ₹728.67 crore in 0.01% CRPS to be redeemed after 20 years. The company expects its unsecured creditors to write off loans of ₹751.2 crore.
Addressing media on Monday, Jagatramka said he would bring in ₹50 crore of working capital within six months to resume operations. He claimed his scheme was a better alternative to liquidation, or a strip sale, which would have resulted in at least 1,200 job losses and negligible recovery for all stakeholders.
Gujarat NRE Coke has proposed a 90% reduction in its equity capital of ₹1,657 crore. According to the proposed restructuring, lenders will see their stakes in the company going up from 32.39% to 38.83%, which would not include the convertible bonds. Jagatramka and his family’s interests will get diluted from 25.61% to 17.52%.
The promoter claimed that the company’s operating cash flow had turned positive, but declined to give details. He said he needed three-six months to stabilize operations. Gujarat NRE Coke has an annual installed capacity to produce 1.2 million tonnes of metallurgical coke.
In March 2017, Gujarat NRE Coke had voluntarily moved NCLT declaring itself insolvent and seeking moratorium from seizure of assets under the Insolvency and Bankruptcy Code (IBC).
Jagatramka had also planned to submit a resolution plan for the company in consultation with PricewaterhouseCoopers, but was barred from submitting the resolution plan by an amendment to the IBC, which did not allow promoters of delinquent firms from bidding for stressed assets.
Source: Livemint, June 19, 2018