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On the advice of an ad hoc committee, Rolta India has proposed to replace its existing bonds worth $500 million with new five-year bonds at a lower coupon, the company on Monday informed the exchanges. The company expects the reduction in interest to bring relief to its debt repayment.
Rolta India, which is struggling to meet repayment deadlines, has proposed to replace existing 8.875 per cent Senior Notes worth $300 million due in 2019 and $200 million worth of 10.75 per cent bonds due in 2018, with new five-year bonds worth a total $500 million.
In an explanation, Rolta India said in 2015, the company and Bharat Electronics had formed a consortium to bid for the development of Battlefield Management System, a large-value project for the Indian Army to digitise its command, control and communication systems.
The IT services provider had heavily invested upfront in the development of the project and had raised funds from banks and through debentures.
The company has been facing delay in receiving payments related to the project, but now expects to collect dues relating to the project as on March 31, in phases through to fiscal 2020.
Impact on capex, cash flow“While majority of the total expected cost in developing the prototype for the Battlefield Management System will be eventually reimbursed, the significant capital expenditure invested has impact on Rolta’s working capital cycle, resulting in tight cash flow,” the company said.
Rolta India’s total debt increased to $965 million in October 2016 from $713 million as of March 2015. Of the existing debt, around $499 million represents notes.
Owing to delay in interest payments, bondholders of Rolta India had in 2016 formed a committee, led by investment bank Houlihan Lokey, to negotiate restructuring of the debt.
The company is still in negotiations with the committee and is yet to reach a conclusion, Rolta India said in the statement.
Under the proposed restructuring plan, the company will issue new five-year bonds with a 2 per cent payment-in-kind coupon, which allows the issuer to pay interest by delivering additional bonds, instead of a coupon payment.
“This will effectively provide Rolta with a liquidity bridge until it can return to more normal operations,” the company said.
Shares of Rolta India rose over 15 per cent post-announcement of the plan and ended at ₹61.60 on the NSE.
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