Equity infusion of Rs 2,000 crore likely, SBI Capital’s advisory report expected by end of month.
Cash-strapped telecom infrastructure company, GTL Limited is likely to head for corporate debt restructuring (CDR) forum to rework its debt payment obligations. The proposed restructuring is likely to see an equity infusion of Rs 2,000 crore, said sources in the know.
Although no final decision was taken, GTL’s lenders are preparing the grounds to consider a proposal for a financial restructuring through CDR, said banking industry sources.
A senior executive of a Mumbai-based public sector bank said the company was facing financial challenges and discussions with lenders are underway for a comprehensive CDR package. Another public sector bank official confirmed the development saying “they are preparing to go for a CDR”.
A GTL spokesperson, however, told Business Standard: “No final decision has been taken and no report has been finalised. So it is premature for us to comment on the same.”
CDR is a mechanism to address potential bankruptcy, which has in the past helped companies like Essar Steel, S Kumars, Wockhadt and Ispat to restructure their debt and finances. Instead of getting into prolonged legal disputes, the forum also protects lenders and other financial institutions by hammering a package that is acceptable to both corporates and their lenders. CDR packages include an increase in the moratorium of repaying existing loans, revising the rates and write offs.
Since mid-June, the two listed group companies GTL Limited and GTL Infrastructure had been facing a bloodbath in the stock markets resulting in the companies shaving off close to Rs 3,819 crore in their combined market cap. On June 20, GTL Infrastructure had plummeted 62 per cent, the second highest fall in a single day in over a decade for the BSE-500 stock after the Satyam crash.
To soothe the nerves of its investors and lenders, both companies had roped in SBI Capital Market Ltd — the investment banking arm of State Bank of India — as advisor to rejig its debt obligations and review business. SBI Caps is expected to submit its report by July-end.
While GTL infrastructure owns the assets and earns rental income, GTL sells equipment and offers other services to operators.
GTL’s over leveraged balance sheet has been a matter for concern for all. The current crisis has aggravated, as interest rates have gone up, resulting in higher payouts. According to the company, a four per cent rate rise alone has translated to an interest payment rise of Rs 600 crore for the two companies.
There has also been a sharp drop in revenues and cash flows because of the squeeze in the scam-tainted telecom sector, which has triggered low capital expenditure, lesser spending, muted growth and a falling demand. Fund raising – both debt and equity – has become a problem for all telecom players, including GTL.
In an earlier interview to Business Standard, the founder and promoter of Global Group that includes GTL and GTL Infra, had said: “We need to revisit our portfolio of investments, equity and debt and restructure them to protect the interests of our stakeholders.”
GTL’s consortium of lenders include SBI, ICICI Bank, Standard Chartered, Bank of India, Bank of Baroda and Axis Bank. Even though GTL Infrastructure has a higher debt burden of Rs 10,000 crore — largely due to its acquisition of Aircel’s tower business — lenders are not worried because the debt is secured, having an asset cover of one-and-a-half times.
GTL Ltd, said most bankers, has a smaller quantum of debt but the challenges are more. The company has close to Rs 4,111 crore debt, and sources in the banking industry said, it is largely unsecured.
GTL is an EPC service provider, with no assets on the ground. “Many lenders have very high provision on these loans,” said a senior banking official on the condition of anonymity, because his bank has exposure in the company. GTL has also made investments in GTL Infrastructure and it holds many bank guarantees, said bankers. They said if GTL starts defaulting, the crisis will snowball.
For lenders, GTL Ltd is like “a de-facto holding company for GTL Infra”. As a consequence, lenders are looking at GTL Limited’s financial situation first, by planning to take the CDR route for a revamp package. While the debt may get restructured, an equity infusion, will become essential. Talks are on to raise Rs 2,000 crore equity, part of which the promoters will have to bring in.
For GTL Infrastructure, some of the lenders have even suggested a merger with Viom, a rival telecom tower company run by the Kanoria family of Srei Infrastructure Finance, Tatas and a few PE players.
