Promoters offer Rs 2,400-crore personal guarantee, retain management control; ICICI to transfer exposure.
After months of intense negotiations with a consortium of 25 lenders, the management of GTL Group has finally resolved all differences to finalise a comprehensive debt restructuring plan for its three companies — the flagship GTL Ltd, GTL Infrastructure and Chennai Networks Infrastructure Ltd (CNIL), a special purpose vehicle (SPV) used to acquire Aircel’s tower portfolio.
The combined debt in the three is Rs 16,200 crore. This makes it the single largest corporate debt recast in recent times. Sources confirmed all lenders had agreed on the basic plan and law firm Luthra & Luthra appointed to finalise the Master Restructuring Agreement (MRA), expected within the next fortnight. Implementation of the Corporate Debt Restructuring (CDR) package will be completed in the next 120 days.
| THE DEBT-O-NOMICS |
| * Lenders approve Rs 16,000 crore of debt restructuring of three GTL group firms |
| * Appoint law firm Luthra & Luthra to complete documentation |
| * Promoters to provide personal guarantee worth Rs 2,400 crore |
| * Promoters to retain management, board control; to bring in additional equity, convert short-term unsecured debt to equity |
| * Lenders to convert 25% of overall debt into CCDs, then equity; 2-year payment moratorium; average interest cost of 11.25% |
| * Repayment tenure extended to 10-15 years |
| * ICICI Bank to transfer GTL exposure to CNIL |
A GTL Group spokesperson did not wish to comment on the issue.
GTL’s promoter will give Rs 2,400 crore in a personal guarantee (Rs 1,800 crore for GTL Infra and Rs 600 crore for GTL). This amount equals the extent the lenders have lost in the interest component of their loans, based on the losses calculated on a net present value (NPV) basis. The personal guarantee makes the promoter personally liable in case of a default.
Some of the smaller lenders had insisted on unconditional guarantees, but that was rejected by the GTL management, which will get to retain management and board control by agreeing to “conditional guarantees”. GTL’s management has also been able to include a force majeure clause to stop lenders from invoking these guarantees in case of any extraordinary circumstances or third-party defaults.
The promoters are also bringing in additional equity of close to Rs 300 crore. The contribution of a similar amount extended to the companies as short-term debt will also get converted into equity.
From July 1, both GTL and GTL Infra get a two-year moratorium on their debt repayment. GTL Infra’s Rs 10,000-crore debt will now get repaid over the next 15 years. GTL will get 10 years for payback.
The average interest rate has been brought down to 11.25 per cent against the prevailing 13 per cent. The group has seen its interest costs jump six per cent in this financial year alone, from an average of nine per cent to 14 per cent.
The banks — as reported by BS earlier — will also convert a large chunk of around 25 per cent of the overall debt in the three GTL entities into compulsory convertible debentures (CCDs), to be converted into equity shares after 18 months.
The quantum of promoter dilution is being worked out. Currently, the promoter holding in GTL Ltd is 23.47 per cent and in GTL Infra was 39.9 per cent as on September-end. CNIL is in the process of getting merged within GTL Infra and is awaiting court clearances. These CCDs, in comparison to preference shares, are safer instruments. Being a debt product, debenture holders will get paid first in case of a financial default; equity holders are last.
In an unprecedented move, the lenders have also agreed to transfer ICICI Bank’s exposure from GTL to the books of CNIL, as part of the CDR programme. In return, ICICI Bank will transfer its 29.5 per cent stake back to CNIL lenders. Last August, ICICI Bank took stake in the company by converting pledged shares into equity after the stock tanked. Over the next few days, the management of GTL is expected to meet ICICI Bank officials to settle the issue.
The culmination of the debt restructuring was cheered by investors. GTL Infra stock shot up 17.4 per cent and closed at Rs 8.45/share. GTL’s stock closed up 6.7 per cent at Rs 32.65/share.
