May not convert pending FCCBs into equity: Sakthi Sugars

Sakthi Sugars is in talks with its bondholders for a possible settlement through redemption, without involving conversion of bonds into equity. “The FCCB bonds are about USD 11 million outstanding. Of the USD 60 million, we have already closed USD 48 million,” M Manickam, Executive Chairman, Sakthi Sugars tells CNBC-TV18.The original conversion price was Rs 275 per stock but because the market value is much lower, people will probably go for redemption, he adds. On sugar prices, he says they have gone up by about Rs 100-150-- about 5-10 percent.Below is the verbatim transcript of M Manickam’s interview with Mangalam Maloo and Reema Tendulkar on CNBC-TV18.Mangalam: Could you give us a sense of the amount of foreign currency convertible bond (FCCB) or the amount of FCCBs which are outstanding right now and where will the company get the firepower to redeem those bonds? A: The FCCB bonds are about USD 11 million outstanding. Out of the USD 60 million, we have already closed USD 48 million, so, about USD 11 million is outstanding. We are in discussion with the bondholders; we should be closing it shortly. Reema: Are you trying to negotiate any haircut on the redemption? A: We are in discussion. We have not finalised any details yet. We are in discussion with the bondholders. Reema: What gives you the confidence that they will be agreeable to instead of converting it into equity perhaps redeeming it if it is not going to be at fair value? A: Probably we will be talking about redeeming it but nothing has been finalised yet. Mangalam: What is the kind of cash that you have on your balance sheet even if you do have to redeem it? When will you get it? Are you going to refinance those as well? A: We need to get it refinanced. We are not looking at cash in banks at this point of time. Reema: What is the conversion price per se?A: The original conversion price was Rs 275. Now, the market is nowhere near there so I don’t think they will be looking at conversion, they probably are looking at a redemption. Reema: One of the points under discussion is to redeem it with a haircut? Give us a sense of what the kind of negotiations are on? A: Nothing is finalised yet so I can’t talk about it because we are in discussion. So, until we finanlise it we can’t make a comment on it. Mangalam: Coming to your business then, we understand that sugar prices have risen nearly 30 percent. What is the spread between cane prices and sugar prices right now that you are seeing in the last couple of weeks? A: We need to have the prices go up to Rs 34 for us to breakeven. We are still around Rs 26-27 so we are still about 20 percent away from the market. Reema: Can you confirm if sugar prices have gone up by 20-30 percent? A: They have gone up by about Rs 100-150 which is maybe about 5-10 percent.Mangalam: In that case can we see a better performance in this quarter and the quarters to come? A: Not this quarter because we will be starting crushing only in next quarter which should be better.