Banks to release Rs 650 crore to ABG Shipyard soon under debt restructuring deal

Largest private sector shipbuilder ABG Shipyard, which is under a CDR, will receive Rs 650 crore infusion from lenders by this month-end as part of the Rs 10,000-crore debt recast deal worked out in March, a top company official has said.
The Surat-headquartered company is confident of successfully getting out of the corporate debt restructuring cell in two years, its executive director and chief financial officer Dhananjay Datar told reporters here late last evening.
The company has convinced the 22-bank consortium led by State Bank, which had two specific reservations, and has got sanction for release of the money, he said.
On the banks' demand for pledge of shares by promoters, Datar said ABG has promised that promoters will be pledging their 68 per cent holding in the company by March 2015.
It can be noted that in late March, a group of 22 banks led by State Bank had cleared the recast of Rs 10,000 crore in loans advanced to the troubled shipbuilder under the corporate debt restructuring (CDR) process, making it the second biggest loan recast in recent times, next only to the Rs 13,500-crore debt recast done for engineering and construction major Gammon India in July 2013.
Under CDR, around Rs 2,500 crore worth of long-term loans and Rs 7,000 crore of working capital loans were restructured with a two-year moratorium for interest payment.
The issue over a Rs 236-crore investment in an asset management company in the tax haven of the Cayman Islands - about which the banks had sought clarity - has also been settled, he said. 

As part of the CDR package approved in March this year, the banks had agreed to lend Rs 1,300 crore to the company for working capital requirements and that the money will be released in two equal instalments subject to compliance of certain conditions, Datar said.

The company has also brought in Rs 300 crore in equity for the CDR package to get accepted, he said, adding the money got raised by divesting non-core assets based in Singapore and Italy. The Rs 650-crore fund is to be utilised for specific purposes, Datar said, adding it will be used on 11 ships under construction, including five from the defence sector.

The prospects for the sector are looking better due to the steps taken by the Modi government, like making only private sector compete for some contracts, he said. He further said orders are coming, but underscored working capital as the real worry for companies like ABG Shipyard, as the amounts paid by customers during the start of a project are getting trimmed and the payments are happening only at the time of delivery.