Foreign lenders to Wockhardt have succeeded in stalling the debt-ridden pharmaceutical company’s attempts to sell its nutrition business to Abbott Laboratories.
The move is, however, unlikely to affect the debt restructuring undertaken by Indian lenders.
A group of investors — represented by QVT Financial — had approached the Bombay High Court four months ago, demanding winding up of Wockhardt as the company did not pay its outstanding Foreign Currency Convertible Bonds (FCCBs) dues.The company had to repay FCCBs worth $140 million, due for redemption last October.
As part of the deal, Abbott was to buy infant food brands such as Farex, Dexolac and Nusobee, along with Protienex, which is an adult food supplement. In addition, manufacturing facilities located in Lalru and Jagraon, Carol Info Services and certain Wockhardt subsidiaries and group companies were part of the proposed acquisition.
Though the deal has been called off, Indian lenders, who are part of the corporate debt restructuring unit, said implementation of Wockhardt’s loan recast package will not be impacted. As part of the restructuring, lenders had agreed to provide additional debt of Rs 516 crore, while a facility of another Rs 255 crore has been sanctioned.
They had, however, attached a rider on sale of non-core assets and repayment of Rs 790 crore debt within six years. Wockhardt has already mobilised close to Rs 300 crore from sale of its loss-making German subsidiary, Esparma, and the animal health division. Further, the promoters, the Khorakiwala family, have generated Rs 909 crore through the sale of 10 hospitals to Fortis.
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At the end of December, Wockhardt’s total debt was estimated at Rs 3,400 crore. The company reported a loss of Rs 184 crore during the quarter-ended December 2009.
While a Wockhardt spokesperson declined to comment, sources close to the development said the Indian company was not keen to pursue the deal with Abbott, as liquidity had improved in recent months.
“The situation has changed now and their nutrition business is annually growing at over 15-20 per cent. They can find a new buyer who will offer better valuations,” said a source.
An executive at a bank that has extended loans to Wockhardt said the deal with Abbott was terminated as the transaction could not be completed within the agreed time frame.
The source added that Wockhardt could also resurrect the deal with Abbott once it settles the issue with the bondholders. The Bombay High Court is expected to pronounce its decision on the winding-up petition filed by FCCB holders anytime as the hearings are already over.
“Abbott views India as an important growth market for nutrition and we will continue to explore strategies to advance our business there. We are continuing to make investments in all aspects of our operations in India and plan to introduce many of our global nutrition products to Indian consumers”, Abbott spokesperson Scott Stoffel said in an e-mailed response to a questionnaire from Business Standard.
QVT officials could not be contacted for comments.
| TIMELINE |
| April 2009: Wockhardt announces intent to restructure debt, recast of certain businesses and units. Promoter Habil Khorakiwala steps down as MD, son Murthaza replaces him |
| June 2009: Announces sale of German subsidiary Esparma to Mova GmbH for Rs 120 crore and veterinary business to French company Vetoquinol for Rs 170 crore |
| July 2009: Bankers approve Wockhardt's debt restructuring package; company signs an agreement to sell nutrition business to Abbott |
| August 2009: Khorakiwala family sells 10 hospitals to Fortis for Rs 909 crore |
| October 2009: DBS Bank, BNY Corporate Trustee Services file winding up petition in Bombay High Court. Barclays Capital and Calyon also file similar petitions |
| January 2010: Bombay High Court declines to grant an injunction to stall sale of nutrition business. Foreign lenders, represented by QVT, suggest that Wockhardt issue fresh FCCBs, which can be converted within five years |
| February 2010: Foreign lenders agree to sale of nutrition business, subject to conditions |
| April 2010: Wockhardt-Abbott deal on sale of nutrition business called off. |
Wockhardt’s share price rose by 3.32 per cent to close at Rs 143.30 on the Bombay Stock Exchange.
Also read: Jan 17: Wockhardt-Abbot deal gets high court go-ahead