The Hindu Business Line : Lenders readying BPL debt recast

WHILE the promoter family of Bangalore-based consumer durable maker BPL squabbles on before the Company Law Board (CLB), the lenders to the company are looking ahead to the future of the business they helped build.

Led by ICICI Bank, BPL's lenders, foreign and domestic, will meet on Wednesday to give finishing touches to a liberal package that would pay off some of the debt immediately and recast the remaining of its Rs 1,400-crore debt.

The final clearance is likely to come through at a meeting of the corporate debt restructuring (CDR) forum of banks and financial institutions on October 8, an institutional source told Business Line.

According to the package, Sanyo Electric of Japan will bring $70 million (around Rs 321 crore), which will go to pay off foreign lenders fully and Indian banks partly.

Foreign banks have agreed to take a hit of nearly three-fourths of their outstanding Rs 480 crore as on March 31, 2003, the source said.

The plan was made possible after Export Import Bank, which was until now not agreeing to the recast, came around, paving the way for the CDR forum to seal the restructuring package.

Lenders, who represent at least three-fourths of the total debt, need to agree to implement a package under the CDR mechanism. Exim Bank's vote is crucial in this regard as it completes that requirement.

While ICICI Bank has the largest exposure to the company at about Rs 600 crore, Canara Bank has about Rs 150 crore and Exim Bank about Rs 40 crore. Sanyo had refused to pump in money until the restructuring was done.

As per the plan, the colour television business, valued at $80 million (around Rs 366.8 crore), will be hived off into an equal-share joint venture with Sanyo. It is expected to begin operations by December.

A few of the lenders will waive 50 per cent of payments due to them and the rest will partly defer repayment by the "residual BPL" for 10 years.

The lenders who have agreed to take the 50 per cent cut will take home a quarter of outstanding in cash and convert 8 per cent into term-loans at an interest rate of 12.5 per cent and the rest into 12.5 per cent preference shares.

Lenders who have chosen to defer the repayment for 10 years will get 2 per cent of their dues in cash while 70 per cent will be converted into zero-coupon 10-year bonds. About 28 per cent of their loans will be converted into 12.5 per cent term-loans and 12.5 per cent preference shares.

The lenders estimate that the "residual BPL", which will make medical electronic equipment, dry cells and black and white television, will show a gross profit of at least Rs 50 crore in two to three years.

Mobile phones on its radar

BPL is looking at the feasibility of manufacturing low-end mobile phones.

According to sources, once the restructuring is over, the company is likely to explore tie-ups with mobile phone handset manufacturers.

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