The Hindu Business Line : IDBI nod for Nagarjuna Fert debt revamp package

THE Corporate Debt Restructuring (CDR) Cell at IDBI has approved a major restructuring of the debt profile of Nagarjuna Fertilisers and Chemicals Ltd (NFCL), involving a substantial reduction of interest and rescheduling of loans.

Apart from stipulating creation of first pari passu charge on all the fixed assets of NFCL subsidiaries and group companies - Jaiprakash Engineering and Steel Company and Nagarjuna Power Corporation - for additionally securing the loans, the CDR package stipulates additional security by irrevocable and unconditional personal guarantee of NFCL's core promoter, Mr K.S. Raju.

For the sacrifice of interest agreed by the lenders on account of differential interest rates, NFCL would be required to issue 37.2 lakh preference shares of Rs 100 each, aggregating Rs 37.2 crore.

The interest differential between the contracted rate and CDR-approved rate relating to financial year 2003-04 alone amounts to Rs 70.75 crore.

On a total debt burden of Rs 1,664.11 crore, the company had incurred interest and finance charges of Rs 255.73 crore during the last fiscal.

The preference shares on conversion into equity would enable the lenders to significantly enhance their equity holding in NFCL to 22.01 per cent on the expanded equity base from the existing level of 15.06 per cent on the current equity of Rs 416.6 crore.

Accordingly, the holding of promoters and associates would come down to 33.08 per cent on the expanded equity from the existing 36.69 per cent.

IDBI recently approved the debt restructuring package with effect from April 1, 2003.

The CDR package envisages issue of 0.01 per cent coupon optionally cumulative convertible redeemable preference shares and debentures on a private placement basis in favour of financial institutions and banks.

The conversion of preference shares into equity would be carried out only after the entire debt liabilities are fully repaid, anytime after 2016.

The lenders have reserved the right to convert 20 per cent of their outstanding debt after 2010-11 into equity.

Further, in the event of any default in servicing the debt, the lenders also have the right to convert the defaulted amounts into equity at par or any other instruments.

In any case, the promoters of NFCL would be given the first right of refusal when the lenders decide to sell their holding in the company. According to NFCL, though IDBI, IFCI and LIC have approved the debt restructuring package, UTI has not accepted it.

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