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Arvind lenders clear debt recast scheme -- Petition to be filed in High Court

Our Bureau

AHMEDABAD, July 20

THE lenders to Arvind Mills Ltd, who met at the company's office on Friday last, have ratified the Ahmedabad company's Rs 2,751-crore debt recast plan.

According to a company release, secured lenders accounting for 89 per cent of the outstanding debt, 99 per cent of the unsecured lenders and 96 per cent of the working capital lenders have voted in favour of the scheme. It was mandatory that debtors -- 7 5 per cent in value and 50 per cent in number -- vote in favour of the scheme.

Among those who opposed the debt restructuring plan, along with Commerzbank, Germany and Bank of Nova Scotia, Canada, was Dai-Ichi Kangyo Bank of Singapore. The first two were part of the syndicate whose line of credit was to the tune of $75 million, acc ounting for 28 per cent of the total secured credit. The combined stake of Commerzbank and Bank of Nova Scotia in the $75-million debt amounted to 29 per cent.

The Rs 2,751-crore debt rejig plan, which was filed under Section 391 of the Companies Act, had decided to peg restructured debt at Rs 2,028 crore. Thus, the company has opted to buy back up to Rs 723 crore, with the minimum amount to be repurchased kept at Rs 550 crore. Significantly, the debt rejig plan makes no distinction between secured and unsecured creditors.

Mr A.L. Shah, senior advocate under whose chairmanship the three meetings of the creditors took place, has forwarded the results of Friday's meeting. As per the laid down procedure, a petition will now be filed before the Gujarat High Court to sanction a scheme of arrangement with creditors under Section 391(2) of the Companies Act.

"We will be buying back about Rs 700-crore debt in this scheme. It will be largely a toss-up between schemes A and B where the main difference is in the 3 per cent additional buyback possible in the former, but with a commitment to reinvest about 6 per c ent. In the case of the debt roll-over, the first scheme allows for repayment in the fifth year at 3 per cent interest, while in the other two the repayment will be staggered over the fifth to 10th year at an average interest of 10 per cent," Mr Jayesh S hah, Chief Finance Officer of the company, told Business Line.

The major lenders include the Union Bank of Switzerland, whose exposure in Arvind's $125-million floating rate notes was at $93 million, before Arvind began the process of freezing its repayments including the penal interest pay-outs in late 1999. It is understood that UBS has already intimated its willingness to buy back its debt at the discounted rate and its loan aggregating about Rs 500 crore alone would account for a major portion of the debt buyback.