Metal
Case Outline
- A leading integrated steel conglomerate was confronted with a debt burden of ~ INR 90Bn
- Company’s performance was adversely hit due to certain macro-economic factors viz. global oversupply, continuous fall in commodity prices, unfair duty structure and adverse currency fluctuation
- Above factors adversely affected market demand and margins, leading to idle capacities and cash losses.
- Company had already undergone restructuring twice under CDR mechanism
- Absence of a comprehensive solution to address the expected cumulative cash flow deficit over the short to long term period, estimated ~ INR 20Bn.
- Company’s major expansion project was underway.
Issue
- Industry downturn coincided with company’s expansion plan.
- Net worth on the verge of turning negative with consequent referral to BIFR
Normal Solution
- Would have rendered company’s account a non performing asset with the lenders
- Banks faced with the possibility of huge provisioning, in view of the account being reckoned as sub-standard from the date of first restructuring.
- Value destruction for the shareholders
- Long term viability would have become extremely difficult.
Brescon Value Add
- Debt-cum-business reorganization scheme involving corporate restructuring worked out to deleverage the company, leverage idle capacities, optimize operations and ensure long term stability
- Trifurcation of business into 3 separate entities on slump sale basis and assigning of debt, based on end use sustainability.
- Aligning of the project loan over the requisite tenures ensuing the viability and as permissible under regulatory guidelines.
Impact
- Enabled structuring/ refinancing of debt at better terms in demerged entities thereby resulting in reduction of costs and improve creditworthiness
- Ensured sustainability of debt workout without further sacrifices on the part of lenders/ banks.
- Unlocked value for shareholders, including lenders for their shareholding
