Haldia Petro plans $300m ECB, CDR cell gives assent

Haldia Petrochemicals Ltd (HPL) has proposed $300 million external commercial borrowing (ECB) to convert part of its high-cost rupee debt into cheaper foreign currency loan.

The offer to this effect was made by lead promoters of HPL, The Chatterjee Group (TCG) and the Government of West Bengal (GoWB) to the corporate debt restructuring (CDR) cell.

The CDR cell, led by Industrial Development Bank of India (IDBI), is learnt to have given its no-objection to the proposal.

At present, HPL has a debt of Rs 4,500 crore over an equity base of Rs 1,153 crore. The CDR cell is expected to come up with a debt restructuring package within 10 days which will include fresh equity infusion of Rs 600 crore, conversion of part of debt to equity and reduction of average interest rate from 14.5 per cent around 10.5 per cent.

However, the promoters are willing to swap a part of restructured debt with cheaper foreign loan, taking advantage of the relaxed ECB guideline formulated by Union finance ministry.

The Centre last week allowed companies to raise up to $500 million through automatic route with average maturity of at least five years. It also relaxed the interest rate spread on over five years ECBs to 350 basis point above Libor.

The company hopes to raise loan at between 4-5 per cent as compared to restructured loan of 10.5 per cent.

"We expect to record cash profit once the debt restructuring is carried out by the CDR cell. On top of it, HPL will post much stronger gains if the ECB materialises," sources close to the development said.

In that case, HPL may retire close to Rs 1,400 crore worth of rupee debt to financial institutions.

Observers feel it may not be difficult for HPL to raise the dollar debt given the up cycle in the petrochemical industry.

"The uptrend will continue for the next three years and the margin for the company will soar. Moreover, no new capacities are coming up in near future which will keep polymer prices high," they pointed out.

For the next three months, however, HPL will be busy in arranging Rs 600 crore of fresh capital, part of which is to come through an initial public offering (IPO) fully underwritten by TCG. ECB will happen after that.

Moreover, TCG will convert Rs 107 crore as committed by it earlier.

GoWB will convert Rs 270 crore of debt into preference share of 10-year tenure with coupon rate of one per cent. The other promoter-Tata Sons will remain with a small stake.