Lenders to the GTL group have sought a personal guarantee from the company’s promoter, Manoj Tirodkar, as part of the negotiations for corporate debt restructuring (CDR). According to banking sources privy to the discussions, Tirodkar is reluctant to agree on the extent of guarantee sought by the 25-member consortium of lenders, led by IDBI Bank and ICICI Bank.
The package, expected to be finalised after on Tuesday’s meeting, has now been pushed to next month.
Sources close to the company said any personal guarantee had to be linked to the current market and telecom sector realities and, therefore, could not be linked to external or third-party risks. However, they said most of the bankers had agreed to the overall restructuring package, 74 per cent agreeing in principle. Some “minor fine tuning” could be expected. According to them, the package should get worked out by the end of December.
A GTL spokesperson refused to comment on the issue.
According to CDR packages, banks often ask for such additional security if the debt is of a significant amount. The guarantee given by the promoter makes him personally liable in case of a default. This acts as an extra comfort factor for lenders.
The combined debt of the three GTL group entities — GTL Ltd, GTL Infrastructure and Chennai Networks Infrastructure Ltd (CNIL), a special purpose vehicle (SPV) that was used to acquire Aircel’s tower portfolio — stands at a whopping Rs 16, 200 crore.
While the specifics of the personal guarantee sought by the lenders are not known, some bankers said GTL’s management suggested it should be capped at the promoter’s net worth.
It is believed that some lenders wanted a higher cap. Sources said bankers wanted GTL promoters to give personal guarantee to at least the extent of the sacrifice they were making on their exposure on the basis of the losses calculated with net present value (NPV). The lenders are converting part of the debt into equity and will also restructure interest rates on the residual debt.
Promoters hold 23.47 per cent and 39.90 per cent in GTL and GTL Infrastructure, respectively. CNIL is in the process of getting merged within GTL Infra and is awaiting court clearances.
On the basis of the current market value, the promoter’s net worth in GTL Infra will be around Rs 365 crore, while in GTL Ltd, it will be Rs 96 crore. GTL Infra and GTL Ltd’s market cap is Rs 914.27 crore and Rs 410 crore, respectively.
The lenders are also looking to convert 25 per cent of the overall debt into compulsory convertible debentures (CCDs), which will be converted into equity shares after 18 months.
The promoters of GTL, who have pumped in close to Rs 500 crore and are looking at an additional infusion of Rs 400 crore as unsecured debt, have also sought to convert the amount into equity as part of the CDR exercise.
The conversion price will be on the basis of the six-month moving average, in line with the Securities and Exchange Board of India (Sebi), the sources added. The forward conversion will make it difficult at this point to calculate the exact quantum of promoter stake dilution.
In comparison to preference shares, CCDs are safer instruments. Since this is a debt product, during financial defaults, debenture holders will get paid out first while equity holders are last in the priority list.
The lenders are also looking at giving the company an 18-month moratorium, besides extending the tenure of the debt. The average interest rates are also likely to be brought down to 10.75 per cent. The GTL stock rose 10.76 per cent today to close at Rs 42.20, while GTL Infra rose 11.18 per cent to close at Rs 9.55 on the Bombay Stock Exchange.
