Unable to pay, Ispat to ‘roll over’ ECBs

Unable to pay, Ispat to ‘roll over’ ECBs
ENS ECONOMIC BUREAU

MUMBAI, MAR 28: After Essar and SPIC, now it’s the turn of Ispat Industries Ltd (ILL) of the Mittals to roll over its euro convertible bonds (ECBs). These bonds, aggregating $125 million (around Rs 580 crore) are redeemable on April 1, 2001, which is only four days away.

However, as the company is not in a position to pay up the ECB holders, it has apponted ANZ Securities (UK) as the financial advisors for the purpose of restructuring these bonds. Restructuring could mean extending repayment schedule and a cut in interest rate.

Essar and SPIC had rolled over repayment of their ECBs last year. Ispat’s will be the third default by an Indian company abroad. Ispat is not in a position to convert the ECBs given the high conversion price of Rs 67 per share. As against this, Ispat’s share was quoted at only Rs 2.95 on the BSE.

In an official statement, Ispat has stated that it intends to restructure the ECBs and appointment of ANZ is the first step in the process. The company has already initiated talks and discussions with these bondholders. Based on the discussions and feedback received from the bondholders, a suitable formal restructuring plan will now be drawn up and forwarded to the bond holders for their consideration. The Bankers Trust, the trustees to ILL, had called a meeting of the bondholders in London to discuss the restructuring the outstanding bonds.According to sources, Ispat sought a loan from institutions to repay the ECBs but the FIs were not keen to extend funds for overseas loan repayment. “India’s image abroad has now taken further beating. Three defaults in one year have damaged the prospects for other companies as well,” said a banker.

Ispat had recently roped in consultant Ernst & Young for restructuring its huge debt burden. Ispat Industries currently has a debt burden of over Rs 4,767 crore. The company has not yet completed its three million tonne hot-rolled coil project coming up at Dolvi in Raigad district (Maharashtra).

Ispat projects had faced many time and cost overruns. The HR coil project has been appraised by the financial institutions at an estimated cost of about Rs 6,500 crore. To finance the project, the company has availed of debts to the extent of Rs 1,674 crore from various financial institutions. This may be converted into security at par. In theory, if the institutions choose to convert their lending into security, the FIs will obtain a majority stake in the company.

Of the total project cost, which has gone up from the original estimated cost of Rs 4,700 crore, the company has been able to capitalise only upto Rs 3,500 crore with the commercial commissioning of the first phase at 1.5 million tonne. Ispat Metallics’ Dolvi project cost, which was originally mooted at Rs 1,074 crore, was now revised to Rs 2,120 crore.

The commissioning of the project, which will manufacture hot metal for group flagship Ispat Industries, had also faced a delay of 15 months. The appraisal by financial institutions indicated that the project cost which was originally pegged at Rs 1047 crore has been revised upwards to Rs 2,120 crore.

Modi Rubber open offer at Rs 80
MUMBAI:VK Modi and Dr BK Modi of Modi Fashions and Securities and Modikem Ltd in concert with Witta International Inc and Sidh International Ltd, are making an open offer to acquire up to 87,64,186 fully paid-up equity shares of Rs 10 each of Modi Rubber Ltd (MRL). The acquisition, constituting 35 per cent of the outstanding equity share capital (and voting rights) of MRL, is proposed to be made at a price of Rs 80 per share payable in cash, a notice to the BSE said.

The acquisition consortium along with persons deemed to be acting in concert at present holds 58,58,661 equity shares of MRL, representing 23.4 per cent of the paid-up equity capital of the company. The specified date for the open offer has been fixed at March 31, 2001 for the purpose of determining the persons to whom the letter of offer would be sent. The offer will remain open from May 16 to close on June 14.