CG Power lenders give nod for debt restructuring, pave way for takeover by Murugappa group

Our Bureau Mumbai | Updated on November 22, 2020

Lenders of CG Power and Industrial Solutions have given their nod for a one-time settlement and restructuring of debt, paving the way for the Chennai-based Murugappa Group to take over the troubled power equipment maker.

“CG Power, Tube Investments (part of the Murugppa Group) and the lenders have now executed the requisite binding agreements dated November 20, for one-time settlement and restructuring of funding facilities and guaranteed debt of CG Power,” both the companies said in identical stock exchange filings. In August, Tube Investments had agreed to invest ₹700 crore in CG Power for acquiring a 56.61 per cent stake.

CG Power has an outstanding debt of ₹2,161 crore. Of this, lenders, which include a consortium of 14 banks, have taken a hit of ₹1,100 crore and have restructured the rest. This restructuring involves a pact which allows the lenders to be paid ₹650 crore upfront. Additionally, ₹200 crore of debt would be converted into non-convertible debentures with a five-year tenure.

Also read: CG Power shareholders vote en masse to declassify Gautam Thapar as promoter

Lenders would also be paid out of the proceeds from the sale of CG House property on best efforts and as is where is basis, within five years, the filing said. The restructuring also provides for transfer/replacement of non-fund based facilities of the lenders to non-consortium lenders or CG Power procuring and submitting counter guarantees for the same.

In October, at CG Power’s AGM, 99.99 per cent of the shareholders voted for re-classification of the existing promoters and promoter group as public. This indicated that shareholders sought a separation agreement with Chairman Gautam Thapar, wherein the promoter group ceases to have all rights and powers associated with holding a promoter status. Almost all of the promoter shares were pledged to lenders who since then have invoked the pledge to recover their loans. As per latest data, Thapar’s promoter group firms’ shareholding in CG Power was 8,574 shares out of a total of 62.67 crore shares.

These developments come in the backdrop of an alleged fraud in the company when it disclosed that the advances to related and unrelated parties were understated by ₹1,990.36 crore and ₹2,6.63 crore, respectively. Thapar was removed by the company board on August 29, 2019.

CG Power’s unexecuted order book, as per its fiscal 2019-20 annual report is estimated to be ₹3,060 crore, with power order book almost half at ₹1,532 crore.

Published on November 22, 2020

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