Mumbai: Lenders of Ajit Gulabchand's Hindustan Construction Co. Ltd. (HCC) on Friday said they were going to carve out about Rs.2,100 crore of debt on the construction firm to a third-party-controlled special purpose vehicle; certain arbitration awards and claims will also move to the SPV and will significantly deleverage the company and address its asset-liability mismatch.

In a press release, HCC said that its debt – along with receivables comprising approximately an award cover of 1.0x and claims under arbitration of 1.5x – will move to an SPV controlled by a new investor. The tenure of the debt at the SPV will be up to 10 years and repayments from the proceeds of the awards will yield a higher internal rate of return than current yields offered by HCC.

The debt/asset carve-out, which will be in the nature of a slump sale, is subject to lenders’ final approvals. Lenders aim to seek their internal approvals and target to close the transaction prior to 31 March, 2020. The company will also seek the requisite corporate approvals for the transaction, the press release said.

HCC has earlier also monetised its claims with regulatory bodies to raise funds and repay debt. In March 2019, the company’s board of directors had approved the monetisation of certain awards and claims through an SPV controlled by investors led by BlackRock, which was notified to the exchanges. Subsequently, shareholders’ approval was taken to transfer awards and claims amounting to 2,082 crore in exchange for a cash consideration of 1,750 crore. The extent of deleveraging is far greater in the case of the carve-out transaction than in the case of the monetization transaction, HCC said.

HCC added that it is in talks with more investors to do a further, albeit smaller, round of claim monetization with an investor-led consortium, subject to lenders’ approvals.

"After the debt carve-out, HCC’s balance sheet will stand significantly deleveraged with no debt servicing obligations expected for the next 33 months," the press release said.

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