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Wockhardt debt recast suffers blow

Wockhardt debt recast suffers blow
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First Published: Fri, Apr 02 2010. 12 35 AM IST

Updated: Fri, Apr 02 2010. 12 35 AM IST
Mumbai: Embattled drug maker Wockhardt Ltd’s debt restructuring plan suffered a setback on Thursday after a deal to sell its nutrition business to US-based drugs and nutritional giant Abbott Laboratories Inc. was terminated by both sides.
Abbott said on its website that the plan had been scrapped because the Indian company was unable to resolve debt recast issues with some of its lenders. Wockhardt did not say why the plan to offload the unit, valued at Rs620 crore, was called off.
Mint had reported in January that the deal might be blocked by this group of lenders.
The deal had been regarded as critical to the beleaguered Wockhardt’s bid to retire some of its debt. The Indian drug maker, which has liabilities of about Rs3,700 crore, needs to raise Rs790 crore over the next five years under a corporate debt restructuring (CDR) plan approved by its key lenders.
Since the funds to repay debt were expected to come from the divestment of non-core assets, including the nutrition business, Wockhardt had sold two of its businesses—a pharmaceutical unit in Germany and its entire animal health division in 2009.
The valuations of these deals were not officially announced, but people familiar with the matter put the total realization at around Rs200 crore.
The Abbott deal was also part of the non-core sell-off announced in July, but Wockhardt was unable to close it after a group of foreign lenders moved the Bombay high court in December seeking liquidation of Wockhardt to recover their dues.
In another blow, Wockhardt on Thursday informed stock exchanges that its finance head of three decades and whole-time director B. Rajiv Gandhi had resigned.
Regarded as chairman and key promoter Habil Khorakiwala’s confidant, Gandhi was also on the board of at least four other group companies promoted by Khorakiwala. Gandhi could not be reached for comment.
Khorakiwala did not answer calls made to his mobile phone.
Scott Stoffel, responsible for external communications at the Abbott group, said on Thursday in an email that “there are no financial penalties to either party (for terminating the deal).”
Wockhardt’s foreign lenders, including a group of investors who subscribed to $110 million (Rs496.10 crore) of foreign currency convertible bonds (FCCB) in 2004, had filed winding up petitions against the company after it failed to repay them in October, when the securities were due for redemption.
As per the CDR plan, approved by Wockhardt’s lenders, the company was to buy back the bonds at a 65% discount or convert them into equity shares by 2015.
However, the group of bondholders had threatened to block the Abbott deal in the event of the company not resolving the debt. A final court order is awaited. A spokesperson for the bondholders blocking the deal said, on condition of anonymity, that they have also offered to resolve the matter through an out-of-court settlement. A Wockhardt spokesperson declined to comment on the matter.
Meanwhile, in order to comply with the terms of the CDR, Wockhardt must find another buyer for its nutrition business, one of the few attractive segments among its non-core assets.
A sector analyst, who did not want to be identified, said Wockhardt is already on the radar of a couple of foreign drug multinational companies that are interested in acquiring the entire domestic business of the firm.
“So, it must be looking at those opportunities in which the nutrition business, which comprises brands such as Farex, Dexolac, Nusobee infant formulas and Protinex, may get a better valuation,” he said.
ch.unni@livemint.com
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First Published: Fri, Apr 02 2010. 12 35 AM IST