FIs to take over DPC's overseas debt

To use SPV route; meeting with foreign lenders in Singapore on April 22-23.

Indian institutional lenders have finally decided to take over the $640 million (Rs 2,900 crore) overseas debt and export credit guarantees of Dabhol Power Company (DPC) by floating a special purpose vehicle (SPV).

According to finance ministry sources, the domestic lenders to DPC, led by Industrial Development Bank of India (IDBI), are slated to meet foreign lenders on April 22- 23 in Singapore to negotiate the takeover of the dollar debt.

They said de-dollarisation of the foreign debt was the key to bolstering the Indian lenders' negotiating power vis-a-vis GE and Bechtel since the entire equity of the company would then be pledged solely with them.

The sources said the special purpose vehicle, to be floated by the existing lenders, would issue bonds that would be guaranteed by the Centre. These bonds, expected to have a maturity of five years, would carry an interest rate comparable to that on government securities of comparable maturity.

"This will ensure that the risk is spread over a larger number of entities. It will be tough bargaining in Singapore," said an official. Indian institutions and banks already have a Rs 6,000 crore exposure, with IDBI accounting for 40 per cent of it.

In a meeting of the domestic lenders last week called by Naresh Chandra, who heads a task force to resolve the DPC stalemate, the finance ministry prevailed upon IDBI, ICICI Bank and the State Bank of India to expedite the acquisition of the overseas debt. The foreign exposure comprises Rs 900 crore worth of debt and Rs 2,000 crore export credit guarantees.

The meeting, attended by Vijay Kelkar, adviser to the finance minister, NS Sisodia, financial sector secretary, and the financial institutions also discussed the modalities for floating a tender for the bidding process.

While GE and Bechtel have been allowed by a US bankruptcy court to acquire Enron's 65 per cent stake in DPC in two stages, it did not dramatically change the legal position, since the equity was anyway pledged with the lenders, the sources said.

The GE-Bechtel combine, which originally held 10 per cent each in DPC, plans to acquire a 65 per cent stake in the company in two stages.

The sources said this potentially could result in the GE-Bechtel combine taking the Centre to international courts again. The combine has already filed an expropriation case against the government of India.

Power Mission

• To take over the $640 million overseas debt and export credit guarantees of Dabhol Power Company.
  
• De-dollarisation of the foreign debt is the key to bolstering the Indian lenders' negotiating power vis-a-vis GE and Bechtel.
  
• The special purpose vehicle, to be floated by the existing lenders, will issue bonds that will be guaranteed by the Centre.