S Kumars to raise $150m to repay rupee debt

S Kumars Nationwide Ltd (SKNL) is planning to repay its rupee debt by raising $150 million (close to Rs 700 crore at the prevailing exchange rate).

SKNL's proposal was approved at the corporate debt restructuring (CDR) meet held here on Tuesday.

Nitin Kasliwal, managing director, SKNL, told Business Standard, "The proposal has been approved by CDR. We will be able to save up to 55-60 per cent on the interest cost of the loans. The loan will be raised in two tranches, a $50 million loan has already been tied up and soon we will raise another $100 million."

The manufacturer and exporter of synthetic blended cotton and worsted fabrics has loans worth over Rs 1,120 crore towards a consortium of lenders led by Bank of India. The term lenders to SKNL are IDBI, IFCI, Union Bank of India and Bank of Baroda.

The working capital lenders are State Bank of Indore, Jammu & Kashmir Bank, Union Bank of India, United Western Bank, Federal Bank and Indian Bank. The loan is classified as 'doubtful' by some lenders and as 'standard' in the books of some others.

SKNL plans to raise the foreign currency loan from Exim Bank with some of the lenders as guarantors for the loan. The proceeds are to be used to repay the lenders immediately.

The exposure of the guarantors will turn from a fund-based exposure into a non-fund based exposure. The interest component will be repaid in rupees at a reduced interest rate of 7 per cent by 2013. The loan initially carried an interest rate of over 12 per cent.

The company's foreign currency loan is expected to fetch a fine rate over Libor (London inter bank offer rate) since the loan will be granted against the credit ratings of the banks who stand guarantee for it. The company will have to turnaround and repay the loan from its earnings which it is expected to do as indicated by a study conducted by CDR.

SKNL posted losses of over Rs 134 crore for the year ended September 30, 2003, as against a loss of Rs 115 crore in the previous year.

The company had earlier been given a moratorium of 1-2 years on repayment of its high-cost loans. The bunching up of repayments put pressure on the cash flow of SKNL.

Late in April 2003, the CDR group approved a restructuring package which never got implemented. The proposal included reduction in the interest rate from over 12 per cent to 7 per cent and extension of the repayment schedule till 2013. But the proposal was not implemented due to non-compliance of certain conditions.

The lenders have a pari passu charge on all the movable and immovable assets of the company worth Rs 693 crore.