BackCreditors approve debt reorganization plan of Shree Renuka’s Brazil unit
Shree Renuka Sugars said that an assembly of creditors of Renuka do Brasil S/A has approved the debt restructuring plan presented by the unit on 26 August
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Mumbai: A clutch of creditors have approved the debt restructuring plan of the cash-strapped Brazilian unit of Shree Renuka Sugars Ltd, one of the largest sugar producers in the world.
In a filing to BSE, Shree Renuka Sugars said that under the Judicial Protection Law of Brazil, the assembly of creditors of Renuka do Brasil S/A (RdB) has approved the reorganization plan presented by the unit on 26 August.
Shares of Shree Renuka Sugars climbed in reaction to the development. At 10.29am, Shree Renuka Sugars was trading at ₹ 17.05 on the BSE, up 6.6% from its previous close, while India’s benchmark Sensex index was down 0.15% to 27,739.26 points.
The company’s debt woes have been lingering for a while with its credit ratings being affected too.
In March, rating agency Icra Ltd had downgraded ratings of certain term loans of Shree Renuka Sugars to ‘D’ owing to delay in debt servicing by the company.
Icra had said it has downgraded the long-term rating of BB with negative outlook and the short-term rating of A4 to D outstanding on the bank facilities of Shree Renuka Sugars aggregating to ₹ 6,513.47 crore. The downgrade of ratings took into account the delays in debt servicing by the company in the recent past owing to stretched liquidity position arising from adequate accruals from core operations and high debt repayment obligations, Icra had said then.
As per the plan, the assembly of creditors has obliged the banks and most of the creditors of RdB, except employees, suppliers of sugarcane and other essentials and small and medium enterprises, to settle their debts on receiving 30% of the notified value of debt plus interest from the date of plan approval until the date of payment.
As of March 2016, total debt of Shree Renuka Sugar was at ₹ 3,270.20 crore.
The Brazilian unit RdB will settle the debt by selling its Madhu mills with a capacity of 6 million mt cane crushing capacity out of total 10.5 million mt cane crushing capacity. The mill will be sold as an “Independent Production Unit", protected by the law from residual liabilities and contingencies.
Last year, the company’s Brazilian subsidiaries had filed for bankruptcy protection and the management is currently in discussions with the lenders for restructuring of the loans on the books of the Brazilian subsidiaries.
Shree Renuka Sugars will not put any new capital under this plant as debt or equity. However, any shortfall in reaching the target value of 30% or approximately ₹ 1,422.30 crore will be funded by the shareholders of RdB in cash or by sale of Shree Renuka Sugars’s controlling stake in RdB.
A new chief executive officer is being inducted by the board of RdB to oversee the separation of the two mills and the sale process of Madhu Mill, which is supposed to be concluded in 90 days after judicial approval.
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