Home / Companies / Amtek Auto fails to meet bond redemption deadline

Mumbai: Amtek Auto Ltd on Monday failed to repay its institutional holders nearly 800 crore in bonds that were due for redemption on 20 September, said three people familiar with the matter, suggesting that the company may have defaulted on its scheduled payments.

Amtek was supposed to repay the amount to its bondholders as the bonds it had issued in 2010 matured on 20 September, Sunday.

Two of the people quoted above, holding Amtek Auto bonds, said no payment was received till the end of day on Monday.

“We have taken it as a default as the payment was due today. The joint lenders’ forum has called bondholders and company officials for a meeting shortly," said first person quoted above, an official with a bank who holds bonds of Amtek Auto.

Payment had not been received till the end of day, confirmed the second bondholder, adding that some repayments to retail investors may have been made.

The third person quoted above and directly involved in the repayment process said the company did not respond to queries on whether payments are being made. No update was received till the end of the business day, the third person said.

Axis Bank Ltd, the lead arranger for the bond issue, also did not respond to calls. Amtek Auto executives did not respond to calls and emails seeking clarity on plans to repay bondholders.

Meanwhile, the joint lenders’ forum deciding on a corrective action plan for Amtek Auto Ltd’s 6,500 crore loans is still debating the company’s request for additional credit.

There is no consensus among the lending consortium on the issue of additional loans being granted to the company, said three lenders in the know. Discussions, however, are on, the bankers said.

“It may take a couple of weeks before any definite decision arises. They (Amtek Auto) have also floated a structured asset sale plan to lenders but that too will have to wait till lenders agree on fresh exposure," said one of the three people quoted above requesting anonymity.

Some lenders in the consortium are against approving additional funds, said two bankers familiar with the discussions.

“The company has defaulted on its debt obligations to someone. It is not our job as lenders to approve extra funding for that. As of now, the company is trying to look for external sources of funding as well," a senior public sector banker, who wanted to remain unnamed, said.

Still, a plan to approve fresh loans to the company may be cleared if majority of the lenders agree. According to Reserve Bank of India (RBI) norms, if a proposal is accepted by 60% of lenders by number and 75% of lenders by loan amount, others are required to abide by it.

In an interview on 11 September, vice-chairman and managing director of the company John Flintham said the company is looking to raise $1 billion by divesting its stake in some its subsidiaries.

It is in talks with investors to sell a minority stake in excess of 25% (going up to 49%) in its global subsidiary Amtek Global Technologies Pte Ltd, Flintham said. Flintham declined to say who the company is negotiating with.

However, since then there has been no update on these proposed monitization plans. “When one is in trouble, even selling of assets becomes difficult simply because the buyers want to be extra cautious before signing," said Arun Kerjriwal, director of Kejriwal Research and Investment Services Pvt. Ltd.

“The Amtek group is stressed and it therefore becomes imperative that any assurance given to the market is met," he added.

As of March, the company had total debt of 7,844.12 crore. Amtek Auto’s interest coverage ratio, a measure of how easily firms can meet their interest costs, has slipped from 7.28 in March 2008, to as low as 0.09 times at the end of June.

On Monday, shares on Amtek Auto closed at 51.90, up 7.23% on the BSE. The benchmark BSE Sensex closed at 26.192, down 0.1%. Since the start of this year, shares of Amtek Auto have fallen 71%.

In the wake of a likely default, bondholders can move court to attach collateral included in the agreement governing the bond issue, said a corporate lawyer.

“Technically speaking, the bondholders are secured lenders as companies usually place securities during any bond raising. In the event of a default, they can approach the courts and attach these securities for recovery," said the lawyer on condition of anonymity.

Brickwork Ratings, the only rating agency that has a rating on the company’s credit facilities, said the facilities rated by them are not part of the 800 crore in bonds due this month. The agency is monitoring the situation, said a representative of the rating agency.

On Friday, Standard and Poor’s withdrew its long-term corporate credit rating of Amtek Global Technologies Pte Ltd, the Singapore-based subsidiary of auto components maker Amtek Auto, citing “lack of sufficient information of sufficient quality" as the reason, the agency said in a statement.

Ami Shah and Shally Seth Mohile contributed to this story.

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