CDR no quick fix for Deccan Chronicle Holdings

Although the beleaguered Deccan Chronicle Holdings Ltd (DCHL) has decided to restructure its huge debts through the corporate debt restructuring (CDR) mechanism, the strategy may not offer quick solutions, according to experts.

The company’s board met on Friday in Hyderabad and decided to file an application for CDR with the cell concerned.

However, details of the total debt and the quantum of restructuring DCHL would seek have not been disclosed in the filing with the National Stock Exchange.

DCHL has run up debts in the range of Rs3,200 crore to Rs4,000 crore and has been seeking a recast for a while, as repayments were causing significant stress on the company.

A group of bankers that met in Mumbai recently said the company’s loans stand around Rs3,270 crore. But sources said the figure would be higher after taking into account some of DCHL’s unsecured loans.

It is learnt that the bankers concerned have been gearing up to handle the situation on their own as the company’s management has been keeping mum on several key issues.

According to sources, CDR in the current situation is easier said than done. A source tracking the DCHL controversy said: “Normally, every CDR application is unique since the businesses have their unique issues that drag the corporate financial health down. In the case of DCHL too, the bankers will first look at the pain points and the cash flows. The important thing for the bankers to understand before approving any CDR plan is the way the debt was raised and also the deployment of about Rs1,231 crore cash reserves as at March 2012. It is not just an issue about prompt repayment but also how the funds raised from these institutions were deployed.”

It is estimated that the CDR application would take about 45 to 60 days for approval though there are instances of the process taking as long as 180 days, depending on the complexity in borrowing and employment of the capital. “About 75% of the lenders will have to agree to the debt recast. It all depends on the details in the application on how things would change post the CDR,” the source said.