Holders of foreign currency convertible bonds (FCCBs) issued by Sterling Biotech are planning to move UK courts for recovery of $184 million (around Rs 1,000 crore). The five year bonds were due for payment in May 2012.
“We are moving the UK court for recovery of the dues. The case will be filed later this week,” a bondholder told Business Standard.
The bondholders are objecting to certain transactions with Sterling’s oil venture in Nigeria. According to them, Sterling Biotech has 17% equity in the venture for a paltry $20 million, whereas the actual value is manifold. “The reserves were valued by the company itself to be $10 billion recently. If so, how can a 17% stake be sold for $20 million,” the bondholder questioned.
Nitin Sandesara, MD and promoter of Sterling Biotech said, “We have offered them a package. We are in negotiations.”
Though the company has appointed advisers Houlihan Lokey and Avista to restructure the terms, bondholders are not ready to accept these terms due to the alleged discrepancies they have discovered in the books.
“Whether they go to court or not, the company's intention is to pay the money back. Universally, it is bondholders’ strategy to pressurise the company,” said an adviser to the company.
In 2007, Sterling Biotech had issed $250 million convertible bonds. Of these, the company has redeemed and converted bonds amounting to some $115 million or 46% of the initial issue. The conversion price of the bonds was Rs 163.13. However, since the share price has plummeted to Rs 7 levels due to company’s debt problems.
Thus, on May 17, the company was supposed to repay the maturity amount of $184 million, which it defaulted.
Lenders say the plants of the gelatin maker are running well below capacity as it is not able to get working capital loans. State bank of Mysore and IDBI Bank have already filed law suits for recovery of dues.
