HCC lenders carve out Rs 2,100 crore debt/asset to a third-party-controlled SPV

The lenders of Hindustan Construction Company (HCC) on January 10 set in motion the transfer of Rs 2,100 crore of debt to a third-party-controlled special purpose vehicle (SPV), along with certain arbitration awards and claims.

The move is part of the broader process of raising funds and paying off debt, which in other words is called deleveraging.

In a release filed with stock exchanges, HCC said: "The 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 an IRR (internal rate of return) higher than current yields offered by HCC."

The debt/asset carve-out, which will be in the nature of a slump sale, is subject to the lenders' final approvals. The lenders aim to seek their internal approvals and are looking to close the transaction before March 31, 2020.