Spic lenders finally okay restructuring of FRN

The Southern Petrochemicals Industries Corporation (Spic) has managed push through the restructuring of $120 million floating rate notes (FRN) issued in 1996.

In a meeting held in London recently, the note-holders gave their approval for converting 50 per cent of the notes into rupee denominated scrips. This will mean a substantial reduction in the face value of the notes, a press statement issued by the company explained.

This restructuring will reduce the company's debt by about Rs 215 crore, the press release informed. Ashwin C Muthiah, vice chairman, added, " Through this restructuring we have achieved elongated repayments that will help augment our cash flows."

The company has long been struggling to service the FRN, unable to cope with fluctuations witnessed by the London interbank bid offer rate (Libor)-linked and dollar denominated instrument.

The company ended up defaulting on the interest as well as principal payments.

The company had earlier made a failed attempt to redeem small portions (five per cent) of the notes and had approached a consortium of banks for doing so. The request was turned down.

Later in the Rs 1200-crore corporate debt restructuring proposal cleared by IDBI in January 2003, the lenders asked Spic to buy back $72 million FRN at a substantial discount. At the time it was proposed that the remaining $ 48 million could be repaid in phases running up to 2014.

While the buy-back has not happened, the company has managed to partly get out of the dollar-denominated FRN.

"This would hedge the company against possible foreign currency-related risk," the company statement explained.

The details of the repayment rescheduling, however, is not being revealed pending board approval. The stock zoomed 9 per cent to Rs 13.60 on the National Stock Exchange today.