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Supply chain solutions provider Gati on Tuesday announced plans to issue a fresh foreign currency convertible bond (FCCB) to retire its old FCCB and avoid a default on its redemption.
Simultaneously, the company has flagged off a restructuring programme that involves selling off a majority stake in its loss-making shipping division and roping in an overseas partner to take up global supply chain contracts.
“We hope to finalise the two deals by June 2012,” Mr Mahendra Agarwal, Managing Director and Chief Executive Officer of the company, told media persons here.
Stocks of Gati took a battering on the bourses for two consecutive days, triggered by concerns amongst investors on whether it would default on its existing FCCB. It closed at Rs 29.10 on BSE today, down 8.06 per cent from the previous close.
The new FCCB will be for $22 million, which would be adequate to replace the old FCCB of $15 million and an interest of $7 million.
“The FCCB redemption is due on December 6. We are confident that there will be no default on our FCCB commitment,” Mr Agarwal said.
The new FCCB will involve an interest of Libor plus 500 basis points, which works to about 5.5 per cent - lower than that of the old FCCB.
Restructuring
On the restructuring front, the company has entered a MoU with an overseas company to sell majority stake in its shipping division, which will be hived off into a subsidiary before the deal. “We expect to close the deal by June 2012. Once this is done, we expect to see a cash generation of Rs 20 crore per quarter,” he said.
Gati had bought a fleet of three ships for over $40 million in 2008, when asset prices were ruling high. Subsequently, the industry was hit by the global economic meltdown. In the quarter ended September 30, the division spawned a loss of Rs 9 crore, driven by high dry-docking costs during the period.
Another cause of worry for the company is that about 90 per cent of the promoters’ holding are pledged and in the wake of the slide in its stocks, there could be pressure on some selling of the pledged shares.
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