Edelweiss ARC begins BILT Graphic loan recast, may infuse Rs400 crore

Mumbai: Edelweiss Asset Reconstruction Co., which acquired a large portion of BILT Graphic Paper Products Ltd’s loans, is in talks to infuse as much as Rs400 crore into the cash-strapped company, two people aware of the development said.

The cash infusion will help BILT Graphic reopen some of its units that were shut owing to a working capital shortage.

Edelweiss Asset Reconstruction, which currently owns more than 50% of BILT Graphic’s secured debt, is in talks with parent Ballarpur Industries Ltd to restructure outstanding loans by extending the repayment period and to offer additional credit to help the papermaker tide over the current cash flow mismatch, the people cited above said on the condition of anonymity.

Ballarpur Industries is the flagship firm of the Gautam Thapar-controlled Avantha Group and is one of India’s largest producers of writing and printing paper.

Mint had reported in January that BILT Graphic was in talks with potential lenders to raise around Rs400 crore. The firm has been looking to raise debt after talks to sell two paper factories in Maharashtra to JK Paper Ltd broke down in November because of disagreements on valuation.

As per its latest corporate filings, BILT Graphic had a consolidated debt of over Rs6,300 crore. While an email sent to Avantha Group remained unanswered till the time of going to press, an Edelweiss group spokesperson declined to comment.

A large portion of BILT Graphic’s debt was acquired in March, said one of the two people cited above. Edelweiss has acquired bad loans worth Rs5,000 crore of 14 companies at close to Rs2,200 crore, the person said. “Around 75% of the portfolio is from companies that are generating operating cash flows but are not able to service loans due to mismatch in cash flows, and therefore need restructuring,” said the person.

“In such cases, Edelweiss plans to restructure the loans and also infuse additional capital alongside to engineer a turnaround,” said the second person cited above.

“With the exception of a few dead assets which will be sold, the ARC feels that a turnaround is possible in a large number of situations and will work closely with the management and promoters,” the person added.

Edelweiss group has more than Rs10,000 crore ready for deployment over the next four years, of which a large part will go towards priority lending to firms in its portfolio, said the second person. Edelweiss, which has a portfolio size of over Rs35,000 crore, has been selectively bidding for revivable assets. It is among the shortlisted bidders, along with AION Capital, to buy a controlling stake in Uttam Galva Steels Ltd.

The flurry of activity by ARCs can be largely attributed to the new norms set by the RBI that took effect on 1 April, industry insiders say.

Under new rules, if a bank has invested in more than 50% of security receipts created against the sale of its own stressed assets, it has to set aside more money as provisions.