Hindustan Construction Company completes debt resolution plan

Company assigns Rs 2,854.4 cr of lenders' liability and claims of Rs 6,508 cr to an SPV

Hindustan Construction Company (HCC) has completed its debt resolution plan, duly supported by 23 banks. The resolution plan has carved out a significant portion of HCC’s debt along with commensurate assets from its balance sheet.

Under this debt resolution plan, HCC has transferred Rs 2,854 crore of lenders’ liability along with beneficial economic interest in arbitration awards and claims of Rs 6,508 crore as consideration to a Special Purpose Vehicle (SPV). This SPV will have an external investor controlling at least 51 per cent stake and HCC holding the rest.

The SPV's debt is significantly over-collateralised and is expected to be fully serviced from its own receivables, said a company statement. The underlying arbitration awards also carry interest (income), which comfortably covers any accrued interest on SPV debt.

Upon repayment of SPV liabilities, HCC will in fact have the right to receive surplus cashflows as a separate transaction, from realisation of awards and claims (expected to be of significant value). Arjun Dhawan, Vice Chairman, HCC, said, “This milestone gives us the freedom to focus on building our business with renewed confidence, by addressing a fundamental legacy issue relating to delayed arbitration payments."