Wockhardt, DBS reach out-of-court settlement

Wockhardt, DBS reach out-of-court settlement

Mumbai: Troubled Indian drug maker Wockhardt Ltd and its Singapore-based lender DBS Bank Ltd reached an out-of-court settlement ending their battle over repayment of a Rs44 crore working capital loan taken in 2007, said a person familiar with the development.

Wockhardt will settle the loan at a 19% discount, paying Rs37 crore to DBS, according to the terms of the consent decree signed on Saturday,

Earlier this month, DBS had filed a winding-up petition in the Bombay high court against Wockhardt, seeking an order to liquidate the company to recover dues. The DBS petition followed a corporate debt restructuring (CDR) scheme that Wockhardt was granted by its Indian lenders, including ICICI Bank Ltd, State Bank of India and IDBI Bank Ltd.

The consent decree between Wockhardt and DBS also includes the settlement of a disputed mark-to-market loss on account of a foreign currency derivative product amounting to Rs91 crore at a 75% discount. This loss was part of a derivative exposure that the company had with the Singapore-based bank, said the person, who didn’t want to be identified as the settlement document that was signed before the court has not yet been made public.

The winding-up petition filed by DBS had come up for hearing on Friday. A Wockhardt spokesperson declined to comment on the development on Sunday. DBS officials could not be contacted for comments on the weekend.

DBS had previously asked the court for an interim order to restrain Wockhardt from selling assets, which the court declined to grant.

Wockhardt has been struggling financially since early 2008 after it posted a huge loss on the foreign currency derivative, and on mounting liabilities on interest costs as well as short-term loan repayment dues. The situation had forced the company to not only sell some of its local as well as foreign businesses but also seek to recast the debt, which was granted in September.

Apart from loans given by local and foreign banks, Wockhardt had raised funds through foreign currency convertible bonds, or FCCBs, worth $110 million (Rs515 crore) five years ago. The FCCBs were due for redemption in October. But as per the CDR, it made agreements with at least half the holders to redeem the bonds at a 55-60% discount or to convert them into preferential shares by 2015, although these options were not agreeable to the rest.

Following this, several bondholders, including DBS, had also told Wockhardt that they may seek legal recourse for the recovery of their dues.

Meanwhile, two other foreign lenders of Wockhardt, Barclays Capital and Calyon, the corporate and investment banking arm of the Crédit Agricole group, also moved the Bombay high court last week to liquidate the assets of Wockhardt and distribute its proceeds to lenders. Another FCCB holder, BNY Corporate Trustee Services Ltd, had also sent notices to the company.

The petitioners have questioned the CDR exercise that Wockhardt has undertaken, saying the process was unilateral and without following Reserve Bank of India (RBI) rules. RBI guidelines on CDR state that 75% of lenders must approve any such plan.