ABG Cement may receive a debt restructuring package

ABG Cement may receive a debt restructuring package

The new promoter is asking for refinancing of debt and an extension of repayment period.

Lenders to ABG Cement Ltd are in the process of finalising a debt restructuring package for the company, after a recent management change, two people with direct knowledge of the matter have been quoted as saying in the Mint newspaper.

According to the report, global commodities platform SIMEC Group bought a 51 per cent stake in ABG Cement for Rs 525 crore and initiated a management change in the company earlier this financial year.

SIMEC has submitted a proposal to Punjab National Bank (PNB), the lead lender in the ABG Cement case, to reschedule payments of loans worth Rs 2,400 crore. SIMEC has circulated this proposal among other lenders in the consortium seeking their approvals, one of the two people cited above said in the report, requesting anonymity. Under the proposal, the new promoter was asking for refinancing of debt and an extension of repayment period, says the source quoted in the news item.

In September, the RBI had stated in a circular, "In order to further enhance banks´ ability to bring in a change in ownership of borrowing entities which are under stress primarily due to operational/ managerial inefficiencies despite substantial sacrifices made by the lending banks, it has been decided to allow banks to upgrade the credit facilities extended to borrowing entities whose ownership has been changed outside SDR, to ´Standard´ category upon such change in ownership."

A source is quoted in the news item as saying, "Since it is not a case of restructuring, we don´t have to make any large provisions against the case. Moreover, the new promoter also gets some breathing space as lenders will be working on the case like it is a standard account."

SIMEC had first agreed to buy ABG Cement in 2014. However, the deal was delayed owing to concerns around valuation of the business and funding problems. ABG Cement, which is part of the group that also owns ABG Shipyard Ltd, currently runs a 6 million tonnes per annum cement plant in Gujarat. The move in ABG Cement becomes significantly important as the attempts at managing the stress at ABG Shipyard have not led to any satisfactory results.

Earlier, ABG Shipyard had said that its shareholders had rejected the lender´s plan of converting debt into majority equity under the SDR route. Last year, the lenders had first agreed to take majority equity in the shipyard, under SDR norms. With the proposal being rejected, lenders would be struggling to find a reasonable loan resolution mechanism for the company.

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