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Last Updated : Jan 13, 2020 11:05 AM IST | Source:

HCC lenders initiate Rs 2,100 cr debt carve-out into SPV, stock gains 9%

The debt/asset carve-out, which will be in the nature of a slump sale, is subject to lenders' final approvals.

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Shares of Hindustan Construction Company rallied 9 percent intraday on January 13 after lenders initiated carving out Rs 2,100 crore of debt to third-party-controlled special purpose vehicle (SPV).

The stock rallied 38 percent in the last three months. It was quoting at Rs 11.08, up Rs 0.75, or 7.26 percent on the BSE 1039 hours IST.

"Along with debt, lenders also initiated a carve-out of certain arbitration awards and claims in a move that will significantly deleverage the company and address its asset-liability mismatch," the Mumbai-based construction company said in its BSE filing.


The debt - along with receivables comprising approximately an award cover of 1.Ox and claims under the arbitration of 1.5x - will move to an SPV controlled by a new investor, it added.

"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 higher than current yields offered by HCC," the company said.

The debt/asset carve-out, which will be in the nature of a slump sale, is subject to lenders' final approvals.

HCC said lenders aimed to seek their internal approvals and targeted to close the transaction prior to March 31, 2020.

In March last year, the board of directors had approved the monetization of certain awards and claims through an SPV controlled by investors led by BlackRock, which was notified to the exchanges.

Subsequently, shareholders' approval was taken to transfer awards and claims amounting to Rs 2,082 crore in exchange for a cash consideration of Rs 1,750 crore.

"The company is still engaged in discussions with investors and a curtailed monetization transaction with an investor-led consortium, subject to lenders' approvals, may also be pursued at a later stage. As a result of the above developments, there may be a write-back, subject to statutory audit, of the provision taken in Q4FY19 on the signing of terms of the monetization transaction," HCC said.

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First Published on Jan 13, 2020 11:05 am
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