Details before any debt restructuring, they say.
Lenders to pharma major Wockhardt have sought more clarity on the extent and nature of its huge foreign exchange losses before initiating any restructuring of the company’s outstanding credit.
Wockhardt had moved the Corporate Debt Restructuring (CDR) cell, a forum set up by Indian banks to deal with companies unable to service their debt, on March 31. This is expected to help the company get lower interest rates and a longer payment schedule.
ICICI Bank is Wockhardt’s lead lender and IDBI is the nodal agency for the CDR cell.
When contacted, an Wockhardt spokesperson said the CDR was admitted by lenders last week — 75 per cent by value and 60 per cent by number.
For the first time in its history, Wockhardt had slipped into the red because of huge mark-to-market (MTM) losses on account of steep devaluation of the rupee. After the company declared its results for 2008 on April 24 (its financial year coincides with the calendar year), lenders have sought more details on the company’s financials.
A senior public sector bank official said the major issue was the MTM losses. “The extent of such losses is huge. We have to first understand the huge implications and take a call on the quantum that can be taken as a part of the restructuring package,” he added.
Some of the banks are also exploring the option of quitting their exposure to the company through bilateral settlements, even if that means accepting a discount to the original figure of receivables.
On forex losses, the company maintains that some of the banks, based on the early termination clause in their agreement, had ended certain forex contracts and claimed an amount of Rs 489.5 crore. Its board has taken the stand that the forex transactions were unilaterally cancelled by the banks and the MTM losses were on account of the counter-positions advised by the banks. Wockhardt has obtained a legal opinion that these contracts can be disputed and, so, no provision for this has been made.
Wockhardt said it was taking steps to contain MTM losses in the current financial year. The company suffered a net loss of Rs 139 crore in 2008 due to an MTM loss of Rs 581 crore, even after net sales grew 35 per cent to Rs 3,593 crore. Operating profit was up 26.5 per cent to Rs 808 crore. In 2007, the company posted a net profit of Rs 386 crore on net sales of Rs 2,653 crore.
Wockhardt’s debt totalled Rs 3,400 crore on December 31. Of this, the company had borrowed around $450 million in foreign currency.
