State-run Power Finance Corp (PFC) has received approval from its legal advisors to extend a Rs 15,000 crore loan to Shapoorji Pallonji (SP) Group,
people aware of the matter said. The loan will be secured by SP Group’s 18.37 percent stake in Tata Sons Ltd, the people said, requesting anonymity.
SP Group initiated talks with lenders to secure $1.2 billion to refinance a part of the group's Rs 20,000 crore debt, which was due to mature in the last week of May.
The development assumes significance as Tata Trusts have conveyed to lenders that the articles of association don’t permit the sale of shares of Tata Sons to a third party by lenders in case of a default by SP Group. In view of this, the legal advice received by PFC would provide some comfort if it went ahead with the loan transaction, the people cited above said.
The PFC loan is crucial for the SP group, which has been facing challenges due to high debt and steep interest rates for its existing loans. Earlier, the SP Group sought approval from bondholders to postpone the repayment date of a part of its debt from May 26 to September 30, citing difficulties. In return, SP Group sweetened the deal for the debt investors by offering them Rs 400 crore extra, taking the total payment to Rs 1,800 crore. This was for loans availed by its subsidiary, Goswami Infratech.
Tata Sons, on the other hand, has been maintaining that its shares are not freely transferable and if SP group defaults on the debt obligations, the lenders would not be able to sell the collateral, Tata Sons shares, to recover dues since Tata Sons is a private company. The concerns of the Tata Group seem to be that in the event of a default, the lenders may sell shares to some third-party entity, potentially changing the existing control structure of Tata Sons.
Apart from the debt via Goswami Infratech, SP Group has to pay out an additional Rs 17,000 crore for debt raised by its subsidiary Evangelos Ventures for loans maturing on March 31, 2025, according to media reports. The group also has raised about Rs 4,000 crore from HDFC Bank. This was raised by the group entity Sterling Investments and Cyrus Investment.
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