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McNally awaits lenders’ nod for resolution plan

Abhishek Law Kolkata | Updated on July 21, 2020

Williamson Magor group company intends to rope in investors for funds infusion

BM Khaitan family-controlled McNally Bharat Engineering Co is awaiting clearance from lenders to give final shape to its resolution plan. The plan envisages bringing in investors to turn around the debt-stressed firm.

The restructuring plan includes converting interest payable on bank loans into a long-term non-interest bearing instrument.

McNally Bharat is planning to rope in a consortium of investors. One of investors has already made a binding offer to the lenders. However, with the outbreak of the pandemic, there has been a delay in clearance of the resolution plan by the lenders.

“Because of the Covid-19 lockdown, progress of the funding plan has been impacted,” it had said in a statement to the bourses.

“We have received a term sheet for fresh infusion of funds for debt restructuring. The term sheet is under discussion with the lenders,” an official told BusinessLine, adding that at present, the company was unable to bid for new projects since bank guarantees are not available. This despite the fact that there are enormous opportunities available to the company.

McNally owes around ₹3,000 crore to a consortium of banks, led by the Bank of India.

Incidentally, the company’s auditors, in their report, have noted that “the ability of McNally to continue as a going concern is solely dependent on bankers accepting the debt recast proposal”.

McNally Bharat Engineering, part of Williamson Magor Group, reported revenues of ₹568 crore (₹1,518 crore) in FY20. Its net loss stood at ₹381 crore (₹466 crore).

“The company’s financial performance has been adversely affected because of a downturn in infrastructure and core sector, working capital constraints and external factors beyond its control,” it said in a notice to the bourses.

Qualified report

V. Singhi & Associates, the auditors, have qualified the fourth quarter and full-year results, saying the financial statement “does not give a true or fair view”.

One reason for this adverse opinion is that McNally did not recognise interest expenses (for the fiscal and Q4 FY20), including inter-corporate borrowings to the tune of ₹290 crore.

A senior company official, meanwhile, pointed out that as per RBI guidelines, the lenders have stopped debiting interest on their outstanding debt.

Published on July 21, 2020

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