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M. Ramesh

Seek `improved offer'

Chennai , Aug. 31

Banks that have lent to Southern Petrochemical Industries Corporation (SPIC) have rejected all the three options put forward by the company for debt restructure.

At a recent meeting of the consortium of banks, the company was told to come out with an "improved offer", sources in the banking industry told Business Line on Wednesday.

To bring in strategic investors

The company had given a detailed proposal, divided into three options, under which strategic investors would be brought in, first to lend to and then take stakes in a new company that would be formed by hiving off SPIC's fertilisers business. The funds raised from the strategic investors (Deutsche Bank, AMD Capital and WL Ross) would be used to pay off the banks. The three options differed in details such as the investor, infusion of funds, mode and quantum of debt that would be restructured and the "sacrifice" that the lenders would need to make.

None of these proposals found favour with the banks, as the sacrifice ranged between Rs 660 crore and over Rs 1,000 crore, sources, who did not want to be identified, said.

It is understood that SPIC has requested the lead banker, Indian Bank, to formulate an alternative proposal. The bank has declined to comment on this.

SPIC, which produces fertilisers, is facing funds crunch, mainly working capital. It has Rs 2,844 crore of debt, which is more than its 2005-06 turnover of Rs 2,054 crore.

To sell pharma unit

In a `Corporate Debt Restructure' package approved by lenders in March 2003, SPIC was to bring in Rs 565 crore in 2004-05. The company had intended to raise the funds by selling its pharma and biotechnology units and divesting its stake in Indo-Jordan Chemicals, a SPIC joint venture in Jordan.

Bankers said it had been difficult for SPIC to sell the pharma division, which makes Penicillin, because prices of the drug have crashed due to imports from China, making the business unviable. There are difficulties in divesting stake in Indo-Jordan Chemicals too because SPIC's stake has been pledged with Exim Bank of India and the bank has to agree for the stake to be sold.

It is against this backdrop that SPIC has been asked to come up with an improved offer.

More Stories on : Non-Performing Assets | Restructuring | Fertilisers

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