Logistics
Case Outline
- A joint venture between various State Govt undertakings and one of the largest private sector companies engaged in port and storage facilities, majorly catering to the sponsors’ captive requirements
- Facilities were tailor-made for the sponsor companies, keeping in view their respective product slate with a “take or pay” agreements
- Project was completed after suffering time and cost overruns
- Inability of some of the promoter companies to honour “take or pay” agreements considering the financial restructuring they were themselves going through, led to challenges in debt servicing.
- Inspite of financial restructuring undertaken, the performance did not improve as envisaged.
Issue
- Viability of the Project in doubt
- Reluctance on second time restructuring within a short span of 2 years
- DER reached a high level of ~ 14 times
- Uncertainty regarding the extent of sponsors’ further infusion required in the long run.
Normal Solution
- Normal course of recovery by lenders would have resulted in a prolonged process with value destruction for the sponsors and eventually substantial haircut for the lenders
Brescon Value Add
- Convinced sponsors about the need for upfront substantial contribution of over INR 1Bn, one of the highest under the CDR mechanism while managing diverse views of the sponsor group constituents
- Convinced the lenders on viability of the project.
- Long term restructuring reduced to 12 years despite earlier restructuring for 15 years.
- Ensured removal of ‘take or pay” option thereby providing operational freedom
Impact
- Consistent and steady growth in revenues and profitability
- Substantial improvement in net worth resulting in debt equity ratio reducing to less than 1, within a period of 6 years
- Safeguarding of the debt value for the lenders
