Mumbai: The Bombay high court on Friday admitted a winding-up petition filed by the creditors of drug maker Wockhardt Ltd, allowing a group of aggrieved bond holders to move an application for the appointment of a provisional liquidator to take possession of the firm’s assets.
The court had completed hearing the case in the last week of February on the petition filed by Wockhardt’s foreign currency convertible bond, or FCCB, holders.
A group of bond holders, led by Singapore-based hedge fund QVT Financial Lp and an overseas unit of Sun Pharmaceutical Industries Ltd, had filed the petition after Wockhardt defaulted on redemption of $110 million worth of bonds in October 2009.
The FCCB holders can now ask the court to appoint a liquidator.
“We have got the order that we wanted in the matter, and can now move the application to appoint a liquidator, though we are awaiting the copy of the judgment to take a decision,” said Janak Dwarkdas, a lawyer who represented the bondholders.
A Wockhardt spokesman said the company will soon appeal against the high court order.
“An appeal do not prevent the petitioners to move the application for a liquidator,” said Dwarkdas.
Another lawyer, who is also involved in this case, had earlier said this option can be sought immediately after the court pronounces its judgment admitting the winding-up petition.
This is to bring all business activities of the defaulter company and its assets under the monitoring of the aggrieved creditors, and finally to recover the money after selling the assets, the lawyer said. He declined to be named.
While a section of investors in FCCBs, mainly Indian banks and a few other institutional investors, had reached a settlement with Wockhardt by restructuring the tenure of the bonds they held, a few others including QVT, Sun Pharma didn’t agree with the restructuring terms. These investors hold $42 million worth of bonds and almost half of it— $20 million—is held by rival drug maker Sun Pharma through an overseas unit.
“We will surely move an application to appoint a liquidator,” said a Sun Pharma spokesman. “There is a due process to be followed in such cases, and we would follow that process together with the trustee and other bond holders, that will help the bond holders to receive their dues, as contained in the original terms of the FCCB,” he said.
Wockhardt, after several rounds of negotiations, had almost settled the FCCB liability with QVT in 2010 offering a higher premium on redemption after extending the tenure. But Sun Pharma requested the court to hear its views before a settlement is arrived at.
“The FCCB issue that is still not settled is small in terms of money, and the bigger liabilities of the company were resolved through the CDR (corporate debt restructuring),” Wockhardt chairman Habil Khorakiwala said in an earlier interview.
Wockhardt, which suffered a loss because of its exposure to foreign currency derivatives in 2008, had to sell some of its assets to pay lenders and meet other liabilities. The company which had a debt of around Rs3,800 crore, including the FCCB redemption at that time, also went for a CDR.
Though large part its loans from lenders such as ICICI Bank Ltd and State Bank of India were restructured, part of the FCCB liabilities remained unresolved.