Hindustan Construction Company lenders meet on wednesday to finalise Rs 5000 cr debt package

MUMBAI: Banks led by ICICI Bank will meet the top management of the construction company, Hindustan Construction Company (HCC), on Wednesday to finalise the terms of debt recast package amounting Rs 5000 crore.

Early this week, the Oversight Committee had approved the debt recast plan of HCC under scheme for sustainable structuring of stressed assets which is also known as S4A. Ajit Gulabchand promoted HCC has debt of over Rs 5107 crore and is the first company to have reached a stage of seeking approval from high level committee.

S4A allows banks to restructure loans of distressed companies by segregating sustainable and unsustainable debt and converting the latter into equity. As per a statement issued by the company 52.5 per cent or Rs 2681 crore of the debt is assumed to be sustainable debt while 47.5 per cent or Rs 2426 crore is unsustainable debt.

Lenders will subscribe to 24.4 per cent of fresh equity at Rs 40 per share totalling to Rs 1008 crore. Following this banks will own 25 per cent stake in the company while promoter’s stake will fall to 27.4 per cent from 36 per cent now. The unsustainable portion of the loan would be converted in optionally debentures for 10 years having a 0.01 per cent coupon.

Sources from the banking industry said that the company has sought for bank guarantee to hasten the arbitration process to recover its dues from different government agencies. During the joint lenders meeting, bankers will discuss the on the allocation of bank guarantee and observations made by oversight committee, said a senior bank official who did not want to be named.

In a statement to the exchange HCC has said the company is following up with government agencies and public sector companies to get 75 per cent of arbitration awarded as per the directive of cabinet committee of economic affairs. In the last two years, HCC has undertaken recovery of its Rs 11,000 crore dues from different government agencies through arbitration proceedings or contractual procedure. HCC has got arbitration award in its favour worth Rs 3427 crore upto September 30 and the company expects that Rs 2000 crore would be released soon. The company further said that claims of Rs 4173 core are in arbitration process. About 70 per cent of these cases were at the initial stage of arbitration process and the company is in the process of transferring these cases under new arbitration act.