Lenders of Lavasa Corporation, part of the Hindustan Construction Corporation (HCC) group controlled by Ajit Gulabchand, have decided to invoke the strategic debt restructuring (SDR) scheme for its Lavasa township project. Using the scheme, lenders will convert debt into a majority equity holding in the company.
“In the joint lenders’ forum meeting of the lenders of Lavasa Corporation Ltd held on September 20, 2017, the lenders have decided to invoke strategic debt restructuring with reference date of September 20, 2017. As part of a comprehensive solution, the SDR has been invoked in Lavasa Corporation and its wholly owned subsidiaries — Warasgaon Assets Maintenance and Warasgaon Power Supply,” HCC said in a stock exchange filing.
“The lenders took note of the fact that due to delay in implementation of earlier JLF (joint lenders forum) approved structure, the project remained stalled for 2 years and an additional interest of around Rs 1200 crore was accumulated and hence release of working capital for the project needs to be resolved on priority,” it said.
The SDR process will involve lowering of debt burden by converting a part of lenders loans into equity along with the implementation of the proposed business plan and infusion of fresh capital by a financial or strategic investor to implement the project and help protect the value of the asset within the timelines prescribed by the RBI in its notification. The invocation of the SDR scheme, which can potentially lead to the promoters losing control of the Lavasa unit, comes after a delay in finalising a previously announced restructuring plan.
Banks were earlier considering recast of Rs 3,500 crore of Lavasa debt under the RBI’s flexible structuring of long term loans. However, the plan has run into roadblocks.
Lavasa Corporation reported a loss of Rs 166 crore for the year ended March 31, 2017, as compared with a profit of Rs 269 crore in the previous year. Total income fell 39 per cent to Rs 609.5 crore year-on-year from Rs 992 crore. HCC was also is in the process of restructuring its loans under the Scheme For Sustainable Structuring of Stressed Assets.
Banks will have to provide at least 15 per cent of their residual loan to a company while converting debt to equity under the SDR norms, by the end of the 18-month period from the reference date.