The Hindu Business Line : Garware Offshore defers proposed bonds issue

On the cards
In talks with a group of financial investors to form joint venture
New financing plan will combine securitisation of receivables on lease contracts, top-up loans and internal accruals

Kolkata , Dec 2

Garware Offshore Services Ltd has shelved the proposed issue of foreign currency convertible bonds (FCCBs) for financing its fleet expansion through a string of asset acquisitions in the next two to three years.

The company is also in an advanced stage of negotiations with a group of financial investors to form a joint venture, which would own support vessels and leave the technical management of the assets to Garware Offshore.

Mr Aditya A. Garware, Vice-Chairman & Managing Director, told Business Line that the proposal for issue of FCCBs to fetch around $25 million has indeed been shelved for now.

"The company was weighing an alternative financing model, which would combine securitisation of receivables on lease contracts, top-up loans and internal accruals," he added.

The change in plan is being effected to keep the debt component down at 75 per cent of the total cost of future acquisitions of three anchor handlers at around Rs 200 crore.

Mr Garware indicated if the company went ahead with the FCCB plan, then it would have skewed up the financing pattern and costs of servicing as also expansion of equity.

Asset acquisitions

The company has already funded asset acquisitions worth around Rs 400 crore for acquiring four anchor handlers (tugs) and a series of offshore platform support vessels (PSVs). The financing pattern so far followed a ratio between debt and internal resources at 7.5:2.5.

Of the three anchor handlers, one would be acquired in 2007 and two in 2008, he added. "We are working on a plan that would allow securitisation of one year's revenue from two PSVs," he said.

Earlier a committee of directors was set up for raising finance by issue of FCCBs. The company had in fact been in negotiations with a number of domestic and overseas entities in the last few months.

Regarding the proposed joint venture, Mr Garware said, "The talks have moved ahead; but we are yet to decide on the initial capital, shareholding pattern and location of the joint venture. Making the joint venture overseas-registered would allow its vessels to use foreign flag.

"We think in a month's time the finer details can be finalised before actual float of the entity," he added.

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