Lenders finalizing debt restructuring package for ABG Cement

SIMEC Group bought a 51% stake in ABG Cement for Rs525 crore and initiated a management change in the company earlier this financial year


ABG Cement, which is part of the group that also owns ABG Shipyard Ltd, currently runs a 6 million tonnes per annum cement plant in Gujarat.
ABG Cement, which is part of the group that also owns ABG Shipyard Ltd, currently runs a 6 million tonnes per annum cement plant in Gujarat.

Mumbai: Lenders to ABG Cement Ltd are in the process of finalizing a debt restructuring package for the company, after a recent management change, two people with direct knowledge said.

Global commodities platform SIMEC Group bought a 51% stake in ABG Cement for Rs525 crore and initiated a management change in the company earlier this financial year, according to the people cited above.

Now, SIMEC has submitted a proposal to Punjab National Bank (PNB), the lead lender in the ABG Cement case, to reschedule payments of loans worth Rs2,400 crore.

The lead lender has circulated this proposal among other lenders in the consortium seeking their approvals, one of the two people cited above said, requesting anonymity.

Emails sent to SIMEC and ABG Cement did not yield any responses till the time of going to press. Senior officials at PNB did not respond to phone calls and text messages seeking confirmation.

The change in management happened outside the strategic debt restructuring (SDR) route and bankers are presently looking at available restructuring options in the company, the person said.

“Under the proposal, the new promoter is asking for refinancing of debt and extension of repayment period,” the person said.

The lenders are exploring the proposal as the Reserve Bank of India (RBI) allows banks to refinance existing debt with new promoters in case of a change in management, without terming the action as restructuring, the second person cited above said, also declining to be named. The refinancing will not be termed as a restructuring if any diminution in fair value of existing debt is provided for the bankers, the central bank had said in its guidelines for such cases in September last year.

“Since it is not a case of restructuring, we don’t have to make any large provisions against the case. Moreover, the new promoter also gets some breathing space as lenders will be working on the case like it is a standard account,” the second person said.

SIMEC had first agreed to buy ABG Cement in 2014, however, the deal was delayed owing to concerns around valuation of the business and funding problems. SIMEC is an international resources group with interests in sustainable power, mining and infrastructure assets.

ABG Cement, which is part of the group that also owns ABG Shipyard Ltd, currently runs a 6 million tonnes per annum cement plant in Gujarat.

“Lenders are favouring restructuring or other changes in loan contract if they can get a management change in stressed companies. However, in sectors where companies are finding it difficult to maintain financial stability, it remains to be seen whether banks will commit fresh money,” said Dinkar V., partner- restructuring, EY.

The move in ABG Cement becomes significantly important as the attempts at managing the stress at ABG Shipyard has not led to any satisfactory results. In a stock exchange notification on Wednesday, ABG Shipyard said that its shareholders had rejected the lender’s plan of converting debt into majority equity under the SDR route.

In December, the lenders had first agreed to take majority equity in the shipyard, under SDR norms. With the proposal being rejected, lenders would be struggling to find a reasonable loan resolution mechanism for the company.

In June 2015, ABG Shipyard had stated that Beirut-based Prinvest Holding SAL had expressed firm interest in buying majority stake in the shipyard, however, that deal did not materialize. The SDR proposal had been accepted because of the company’s failure to find a buyer. The shipyard’s total debt exceeds Rs16,000 crore, according to bankers involved.

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