Gujarat NRE Coke plans private placement with ICICI Bank
The share sale is per the terms set for Gujarat NRE Coke under a corporate debt restructuring (CDR) plan approved by its lenders.
The company will also consider issuing convertible warrants to promoters and non-promoter entities on a private placement or preferential basis, it said in a filing to BSE.
The metallurgical coke maker did not specify the number of shares it plans to sell to ICICI Bank and the promoters of Gujrat NRE.
Under CDR, banks typically offer a payment holiday to a financially stressed company, stretch the period in which the loan has to be repaid, cut the cost of borrowing and sometimes even accept a so-called haircut by reducing the amount of debt the borrower has to pay back.
A CDR is approved if at least 75% of the creditors by value of the loan and 60% by number back the proposal.
On 25 March, Kolkata-based Gujarat NRE said it had received a formal approval for the restructuring of its debts from an empowered group of the CDR cell.
The CDR conditions include debt restructured for 10 years with a two-year moratorium and an extended repayment period.
Gujarat NRE has an annual capacity to make 1.46 million tonnes of met coke.
Banks typically prefer to restructure loans to a troubled borrower to prevent the loans from being classified as non-performing assets (NPAs). That’s because while banks need to make a 5% provisioning when they restructure a loan, the provisions can rise to 25-30% if a loan is classified as an NPA.
A surge in non-performing loans in the Rs.84 trillion banking system has pushed banks to be aggressive in recovering dues from borrowers through asset sales. The Reserve Bank of India (RBI) has emphasized the need for banks to take prompt steps for loan recovery amid concerns over the rising pile of stressed assets.
Gross NPAs at 40 listed banks in the December quarter rose 35.8% to Rs.2.43 trillion from Rs.1.79 trillion a year earlier. About Rs.4 trillion of bank loans are being restructured, both through RBI’s so-called CDR mechanism and on a bilateral basis.