The Hindu Business Line : GSAL works out debt revamp package with banks, FIs

The company has already received sanction letters from the Industrial Development Bank of India (IDBI) and ICICI Bank and expects one from IFCI soon.

Hyderabad , Sept. 9

AFTER an amicable settlement with financial institutions and banks on the outstanding dues, GSAL (India) Ltd, the Hyderabad-based Rs 55-crore ailing sponge iron manufacturer, is now planning to file a compromise affidavit before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).

Earlier, the Board for Industrial and Financial Reconstruction (BIFR) had recommended for its winding up. Contesting this, the company had approached the AAIFR which stayed the orders of BIFR.

Indicating an early revival of the company's operations, the financial institutions and banks have recently sanctioned a debt-restructuring package. According to the GSAL officials, the company has already received sanction letters from the Industrial Development Bank of India (IDBI) and ICICI Bank and expects one from IFCI soon.

In terms of the debt-restructuring package, 75 per cent of the existing term loans would be re-paid over a period of 10 years with telescopic rate of interest averaging yield to maturity at 10 per cent per annum.

The balance 25 per cent of the existing term loans were converted into debentures bearing six per cent per annum simple interest, payable at the end of eleventh year - 2014. The entire funded interest term loan got converted into 0.1 per cent redeemable cumulative optionally convertible preference shares to be converted into equity shares on the terms to be determined mutually at the end of 10th year.

At the end of March 2004, the company had a total debt burden of Rs 289.17 crore involving secured loans of Rs 283.36 crore and unsecured loans of Rs 5.8 crore.

As against this, the company had accumulated losses of Rs 195.45 crore on an equity base of Rs 106.67 crore.

The GSAL officials told Business Line that out of about Rs 110 crore of pending simple interest, Rs 8.5 crore would be converted into equity shares (after capital reduction) in favour of financial institutions, while Rs 41.85 crore would be issued as 0.1 per cent redeemable cumulative optionally convertible preference shares. The financial institutions have accepted to waive the balance simple interest, compound interest, liquidated damages and other charges.

As a part of the restructuring process, the equity share capital of the company would be reduced to an extent of 85 per cent.

Further, the GSAL promoters have agreed to infuse Rs 10 crore as share capital (post-capital reduction) so that it could be used exclusively to repay the term loans of institutions.

They have already brought in an amount of Rs 4.25 crore and the same was used to repay the term loans, the officials said.

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