Financial institutions, led by Industrial Finance Corporation of India (IFCI), yesterday cleared a comprehensive, stand-alone restructuring plan for the G P Goenka-controlled Consolidated Fibres and Chemicals Ltd (CFCL).
A couple of months ago, the financial institutions had asked the group to submit a revised package on CFCL on a stand-alone basis after virtually scrapping the mega merger plan of the group companies, Consolidated Fibres and Chemicals (CFCL) and Star Paper with National Rayon Corporation (NRC).
According to sources, the board of directors of CFCL met yesterday and approved the restructuring plan as cleared by the FIs including ICICI, Industrial Development Bank of India and Unit Trust of India. The restructuring proposal will be effective from March 31, 1998.
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The restructuring plan approved by the institutions envisages reducing the share capital of Consolidated Fibres by 50 per cent, from Rs 62.41 crore to Rs 31.20 crore, and fresh infusion of Rs 25 crore by the principal promoters, the G P Goenka group.
Out of the promoters' contribution of Rs 25 crore, a sum of Rs 15.77 crore will be paid to the financial institutions as interest. The balance amount of Rs 9.23 crore will be employed to redeem the high cost inter-corporate deposits.
FIs had also agreed to a debt restructuring programme of the company, including conversion of a loan component of Rs 51 crore (and interest) into equity, and waiver of a portion of the interest amounting to Rs 8 crore accrued on loans. This apart, penal interest/liquidated damages/compound interest totalling Rs 20 crore has also been waived according to the plan. The restructuring plan of CFCL also includes conversion of Rs 38 crore taken as loan (and interest) into zero interest bond redeemable in 28 instalments, beginning 1999.
All these steps together would lead to a drop in annual interest charges by Rs 13 crore. With these moves, CFCL will be able to commence on a clean slate once again, effective 1998-99. The sources said another bright aspect was the reduction in input costs following the drop in ACN prices from $ 1800 to around $600 per tonne.
During 1997-98, CFCL produced 13,000 tonne of acrylic fibre against a capacity of 12,000 tonne per annum.
Apart from the G P Goenka group, the West Bengal Industrial Development Corporation (WBIDC) and Commonwealth Development Corporation (CDC) are the other major shareholders in CFCL. The three together control 40 per cent.