Lenders finalise SP flagship debt recast
MUMBAI: Lenders to Shapoorji Pallonji and Co. Pvt. Ltd are planning to defer principal repayments by eight quarters and suspend interest till September as part of a debt recast for the cash-strapped company, according to documents reviewed by Mint.
The terms of the recast proposal, however, require Shapoorji Pallonji and Co. to pay the previously agreed interest rate and fully repay the principal. Promoter borrowings of ₹2,724 crore as of March 31 2020 is, however, expected to be converted into perpetual debt, showed the document, a letter sent by Care Ratings to SBI on February 27.
The flagship company of the Shapoorji Pallonji group approached lenders, led by State Bank of India, for a recast after Covid disrupted business. However, its hopes of raising funds by pledging its substantial stake in Tata Sons, the parent of Tata group companies, were dashed after the court blocked its efforts on a petition by India’s largest conglomerate.
While the SP group claimed that its 18.4% shareholding in Tata Sons is worth over ₹1.75 lakh crore, the Tata group valued that stake at less than half of that figure. In December, the Tata group also rejected an SP group proposal to swap its Tata Sons’ shares for stakes in listed Tata group companies.
The company had applied for a debt recast in September, and banks signed an inter-creditor agreement in November to finalise the plan and implement it.
In August, RBI allowed lenders to restructure loans under a special window. While the recast had to be invoked by December 31, banks have time till the end of June to implement the plan for companies and till March 31 for retail borrowers. As part of the recast proposal, a total of ₹22,183 crore worth of debt of Shapoorji Pallonji Co. is being considered for easier payment terms.
The plan has received an RP4 rating from Care Ratings. Under the Reserve Bank of India’s onetime recast, companies should obtain a minimum rating of RP4 to be eligible under the scheme.
The rating signifies that the debt has a moderate degree of safety regarding timely servicing and carries moderate credit risk.
“The above rating is subject to the resolution proposal being implemented as per the terms stipulated in the information memorandum shared on behalf of State Bank of India in February 2021 and other information submitted to Care,” it said.
Emails sent to spokespeople for SBI and Care Ratings remained unanswered, while Shapoorji Pallonji declined to comment
“The company (Shapoorji Pallonji) proposes to raise funds through part or full monetization of its assets (₹10,332 crore). Proceeds from the proposed monetisation of assets would be utilised towards prepayment of loans (₹ 9,348 crore),” the document showed, adding that a partial or full divestment of the company’s stake in Eureka Forbes Ltd, Sterling and Wilson Solar Ltd and Afcons Infrastructure Ltd is being considered in FY22.