No FCCB liability in near-term, maturity in 2017: Subex

Subex on Monday had successfully restructured the Foreign Currency Convertible Bonds (FCCB) and had issued new secure bonds. The company is now looking at March 2017 for the maturity of the FCCBs. In an interview with CNBC-TV18, Subash Menon, Managing Director of Subex said that the maturity period for the entire amount of USD 131 million has been pushed to 2017.

"Out of the total number of bonds, 97% went into an exchange offer which means that the bonds are now either converted to equity straightaway through mandatory conversion or they are remaining as bonds but, with a lower conversion price. Around 3% is there, which actually amounts to USD 3.4 million and that is rolled over for 5 years to 2017 without a change in conversion price," explained Menon.
Hence, Subex at present does not have any pending FCCB renewal in the near-term. Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: Can you take us through what this restructuring of FCCB (Foreign Currency Convertible Bond) would mean in your interest cost burden and also in the increase in your equity float? 
A: From an interest cost perspective, this would not reduce the interest too much. Probably, a million dollars or so. But, the most important thing is that a lot of the bonds are now converted into equity which means the impact on the company with regard to debt equity and overhang of the debt itself will come down.
Equity float will go up significantly. We are talking about an additional 90 million shares being issued on top of the current 70 million. So that will definitely increase. Q: What's the split now between bonds and equity and with this your entire FCCB amount has been restructured or is there still some that could come up for renewal closer to 2012-13?
A: There is nothing that will come up in the near future. The entire amount of USD 131 million has been pushed to 2017. Out of that 97% went into an exchange offer which means that 97% of the bonds are now either converted to equity straightaway through mandatory conversion or they are remaining as bonds but, with a lower conversion price.
Around 3% is there, which actually amounts to USD 3.4 million and that is rolled over for 5 years to 2017 without a change in conversion price. About USD 92 million worth of new bonds at a conversion price of Rs 22 plus for a tenure of 5 years maturing in July 2017 has been issued.
About USD 36 million worth of equity is also converted at Rs 22 plus and then USD 3.4 million of old bonds at old conversion price remains there, maturing on July 2017. Q: Any other plans though in terms of providing balance sheet relief because as you pointed out interest costs will still linger in terms of performance?
A: Now that this whole exercise is over, we are looking at two things. One is of course dollar loans to reduce our rupee loans which will thereby save our interest cost. We are also naturally expecting conversions in the coming months and quarters from existing bonds. It will further reduce our interest cost.
I was referring to the immediate relief. We could have more relief as we move forward. On the balance sheet side of course, you will see that equity has come down quite significantly from 6 to about 1.8 or so. That's a major relief on the balance sheet front. Q: Are you confident that you will be able to service this expanded equity because the substantial dilution and equity with a cost saving of only about a million dollar means that you will be probably fairly stretched on the earnings per share front. By when do you see this kind of restructuring of FCCBs actually becoming non dilutive for you on the EPS front?
A: We are not exactly looking at EPS support from cost production itself. We are looking at that from our revenue growth and consequent increase in EBITDA, net profit and all of that. We believe that in the current year or soon thereafter, we should see that sort of positive momentum in EPS.