ABG Shipyard's Rs 11,000-crore corporate debt restructuring proposal cleared by banks

ABG Shipyard, the largest private sector ship builder in India, has got a fresh lease of life with a 22-lender consortium clearing a Rs 11,000-crore corporate debt restructuring (CDR) proposal, which includes a fresh working capital loan of Rs 1,800 crore.

This is the second largest CDR package in the history of India's banking sector.

The largest CDR package was cleared in July, 2013 for the engineering and construction major Gammon India when its Rs 13,500-crore loan was rescheduled for a 10-year tenor at a lower interest rate.

With the ABG Shipyard deal, the total loan recast in FY 14 has sniffed at a whopping Rs 1 lakh crore, taking the overall CDR book of the banking system well past Rs 3.7 lakh crore.

Both leading lenders and the company confirmed the development.

"At the March 24th meeting of the CDR cell, the lenders have cleared our proposal to recast Rs 11,000 crore of our loans. With this package, our effective interest rate will be 11 per cent, as against 13.5 per cent now," ABG Shipyard chief financial officer Dhananjay Dattar told PTI.

"The package includes a two-year moratorium on interest payment apart from a fresh working capital loan of Rs 1,800 crore. The is rescheduled for eight years now," he said.

The troubled Surat-based shipbuilder, which moved the CDR cell last November, has a debt of Rs 11,500 crore on its books. This includes Rs 2,000 crore of term loans, Rs 7,700 crore of working capital loans and Rs 1,800 crore of fresh working capital loan extended by the consortium led by ICICI Bank, Mr Dattar said.

The deal got delayed as lenders were not satisfied with the guarantees the promoters were offering as also their inability to bring in fresh capital of Rs 300 crore.

When contacted an official of State Bank of India, which has an exposure of Rs 1,600 crore to ABG Shipyard, confirmed the deal but did not offer details.

Mr Dattar said the promoters, including chairman Rishi Agarwal, who holds a nearly 67 per cent stake in ABG Shipyard, have pumped in Rs 230 crore into the company for the deal to go through.

According to banking sources, ICICI Bank, which leads the consortium of lenders, has around Rs 2,600 crore exposure to the company, followed by SBI (around Rs 1,600 crore). Other lenders include IDBI Bank (Rs 1,400 crore) PNB, BoB and Exim Bank (Rs 700 crore each).

The figures, however, could not be independently verified with respective lenders.

Mr Dattar said the troubled shipbuilder has as many as 66 orders worth around Rs 9,000 crore from the Navy, the Coast Guard and Halul Offshore among others. But it has been unable to execute them for want of funds.

However, he hoped that with the fresh working capital and interest payment moratorium, the company will easily come out of the trouble over the next three years.

Describing the CDR deal as being different from other ones, Mr Dattar said while most other troubled companies have large long-term debt on their books, ABG Shipyard has only Rs 2,000 crore as term loans on book which will help it come out of deep water quickly.

ABG Shipyard reported a net loss of over Rs 156 crore on revenue of Rs 284.5 crore, down 40 per cent on year, in the December quarter. Its net income in FY13 stood at Rs 107.13 crore, down from Rs 180.3 crore the last fiscal year (FY12).

The CDR got through after Mr Agarwal provided personal guarantees and pledged a large portion of his 66.8 per cent stake valued at over Rs 600 crore, while holding firm ABG International gave corporate guarantee, banking sources said.

The Agrawals are also into cement business under ABG Cement. But both companies do not hold any stake in each other. The company has its shipbuilding facility at Dahej in Gujarat. The value of loan recast rose this fiscal year to Rs 1 lakh crore now, while CDR referral crossed Rs 1 lakh crore.

February alone saw Rs 4,300 crore being recast across six companies, while in January this was Rs 3,500 crore.

Those in the CDR pipeline include Orchid Pharma's Rs 2,100 crore loan, Chennai-based Surana Industries' Rs 900-crore loan and Mumbai-based truck-maker AMW's Rs 300-crore loan.

Given the economic slowdown, bankers expect at least Rs 20,000 crore more loans coming into the CDR cell in March.

The CDR cell, which is a forum of bankers appointed by the Reserve Bank of India (RBI) in early 2000s, takes a call on individual debt recast packages. All public sector and leading private lenders apart from NBFCs are its members.

For a restructuring package to be approved, 75 per cent of the lenders by value and 60 per cent by number have to agree to the proposal and the promoters must infuse 25 per cent of the fresh loan being sought as fresh capital.