Tulip Telecom hopes tosave Rs 250 crore worth of interest post restructuring of debt and hopes to soon reach a settlement with FCCB holders.
Tulip Telecom , which has received a formal approval for corporate debt restructuring proposal on May 9 will save interest payment of Rs 250 crore, Chairman and Managing Director Hardeep Singh Bedi told CNBC-TV18 today.
The debt recast package covers debt of around Rs 3000 crore. The CDR package includes a 30 month moratorium on principal and 18-month moratorium on interest.
A consortium of 13 banks and financial institutions that had given loans to the enterprise data services company approved the company’s CDR package that will be spread over a period of 12 years.
Bedi said that post the debt recast the company will paying interest rate of 11 percent as compared to 13 percent earlier.
The enterprise data service provider is also struggling with Foreign Currency Convertible Bonds (FCCB) worth USD 140 million. The company has already missed two maturity deadlines for redeeming these bonds, which were issued in June 2007. Bedi said out of this USD 140 million bonds USD 25 million is from Bank of India which has been restructured as a part of debt recast package.
“We are also hoping that USD 20 million which is with another bank will get restructured possibly also as a part of this CDR. So that leaves about USD 100 million. We are in communication with the remaining bond holders and we hope to be able to reach a good settlement with them as we go forward,” Bedi said.
Below is the verbatim transcript of the interview
Q: You have got the formal approval to restructure your debt from the empowered group of the CDR committee. Could you tell us the terms of what would be the interest cost on this restructured debt and what would be the kind of interest saving that you all will have on a quarterly basis?
A: Broadly the interest rates are now going to be 11 percent down from 13 percent and the total interest saving is likely to be around Rs 250 crore which involves us paying a sacrifice of about Rs 60 crore, which has already been paid.
Q: What will the actual interest out go be every month compared to what it was in the pre corporate debt restructuring (CDR) years?
A: That is a very broad picture on the entire thing. The reality is that we had taken short-term debt and there was a need to restructure the debt into a long-term debt. What the bank has done is that based on very detailed studies on the economic viability they have decided that ours is a very robust business. They have decided to restructure the debt from one, three and five years to 12 years. So now the debt needs to be paid over a period of 12 years in a ballooning structure.
For a period of 18 months they have given us a moratorium on repayment of interest and for a period of two and half years that is 30 months they have given a moratorium on repayment of debt. The total interest saving of about 2 percent translates to about Rs 240 crore of sacrifice by the banks out of which Rs 60 crore need to be paid by the promoters which is already being paid and the CDR is accepted.
A: As far as the FCCB is concerned total FCCB is USD 140 million. USD 25 million is from Bank of India, which has already been restructured as a part of this CDR. We are also hoping that USD 20 million which is with another bank will get restructured possibly also as a part of this CDR. So that leaves about USD 100 million. We are in communication with the remaining bond holders and we hope to be able to reach a good settlement with them as we go forward.
Q: How soon could we expect a settlement and how many of your bond holders so far have agreed?
A: Only one of the Indian banks have agreed. We expect the second one to agree shortly. With the remaining we are in communication and difficult to set a time frame but we are very hopeful of being able to close it in a fairly reasonable timeframe.
Q: You said you will reach a favourable agreement with them. What broadly may be the agreement?
A: Premature to say, the banks have made certain offers to the FCCB holders but I think there will need to be a discussion between what the banks are offering to them and what the aspirations of the FCCB holders will be. We will need to strike a balance and arrive at a mutually acceptable solution and we expect to be able to do it in a fairly short time.
Q: Could you tell us how is business per se shaping up? For the last few quarters you have seen revenue degrowth, last quarter you all slipped into a loss as well. Going forward say in the next two quarters are you still expecting a loss or perhaps could we expect a profit in your bottom-line and will revenues start growing.
A: The reality is that if you look at the top 1000 companies, 75-80 percent of them are our customers, their business run on our network. However in between because of the cash flow problems that we faced we could not implement new business. 40 percent of our revenues come from new business which we could not do but our fixed expenses stayed as it is and as a result we had the last quarter going into a loss. We are expecting that going forward we will be able to get back on track as soon as the FCCB is over, as soon as the CDR is over funds will become available and with this we will be able to get back on track and one-two quarter down the line we will be on the growth trajectory exactly the way we were earlier.
Tulip Telecom stock price
On August 22, 2014, Tulip Telecom closed at Rs 2.07, up Rs 0.07, or 3.50 percent. The 52-week high of the share was Rs 8.72 and the 52-week low was Rs 1.55.
The latest book value of the company is Rs 45.34 per share. At current value, the price-to-book value of the company was 0.05.
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